The 20-year-old made his Saints debut in a Capital One Cup game at Leeds United last October, and was named in the squad for the final two league games of the 2012/13 season.
Yeovil-born Lloyd joined Southampton at the age of nine, progressing through the Academy to become a member of the Club's Development Squad for the past two years, featuring regularly for our Under-21 side.
He made 17 appearances in the Barclays U21 Premier League last season, scoring four goals as Saints made it to the Elite Group stage before coming within a whisker of qualifying for the final play-off.
Isgrove played for the Under-21s in their first pre-season friendly earlier this week, scoring in a 4-1 victory over local side Sholing as First Team Manager Mauricio Pochettino watched on.
And, having been selected in the party travelled to Spain earlier today, he will now look to impress in pre-season and in the coming campaign with his future now secure.
"Obviously I'm delighted to sign and extend my contract here at Southampton," said Isgrove.
"It's a great club and I've been here for a long time – eleven years now. The Club has done loads for me and I've been through quite a lot with them.
"I've been in the Development Squad for a couple of years, and now the next stage is to try and push on and get into the First Team. I've signed this contract because I want to get into the squad.
"I was injured a lot last season but, when I have been fit, I've trained with [the First Team] on numerous occasions," added the Wales Under-21 international. "That's helped me as a player.
"The manager showed a lot of confidence in my by involving me in the last two games of last season. That made my decision a lot easier."
First Team Manager Mauricio Pochettino and Lloyd Isgrove in Spain this afternoon
Pochettino commented: "Lloyd has shown a great deal of potential during his early years with the Club, and he deserves this new contract in recognition of the hard work he puts in.
"He has impressed me in his performances for the Under-21s and with his attitude on the training ground, having taken part in First Team sessions regularly last season.
"He now has the chance to demonstrate at senior level the qualities he has shown during his time with the Academy and Development Squad."