The commitment from the 17 year-old follows in the footsteps of fellow youngster James-Ward Prowse, who signed a five-year deal last November.
"I have spoken with the Chairman about a long term plan for me at the Club," Shaw said after making his decision.
"To put an end to all the speculation, I will be committing my future to Southampton. I’m not going anywhere.
"I think Southampton is the place to be for young kids like me. I’m playing in the Premier League for the First Team and that is all anyone wants to be doing, so I just want to carry on.
"I have been at Southampton since a very young age so I've been here a long time now. I think they are happy with me here, and this Club is great for young players like us.
"If you look back over the years, Adam [Lallana] has come through the youth system and now he is the captain of the First Team, and Prowsey (James Ward-Prowse) has just signed a five-year deal – and that is what I want to be doing.
"We have a lot of trust in our youth and there are more players coming through next year, so hopefully we will just carry on going."
Shaw has made a big impression for Southampton this season after being promoted to the First Team squad last summer along with Ward-Prowse, Calum Chambers and Jack Stephens.
Having made his debut as a substitute in an FA Cup game at Millwall just under a year ago, the left-back notched up his first start in the second round of the Capital One Cup away at Stevenage last August.
Shaw’s maiden league appearance came as a substitute at West Bromwich Albion in early November, with his full Barclays Premier League debut arriving days later for the home draw with Swansea City – and he has started every game since.
The full-back’s introduction to the team coincided with Southampton pulling away from the foot of the table, as the team put together a run of results that has seen them beaten just twice in their last ten league games.
Shaw’s personal form has generated speculation over his future in recent months, but his decision to make a long-term commitment to the Club is a demonstration of his desire to continue his progress at St Mary’s.
He is now looking ahead to this weekend's trip to Aston Villa as he seeks to help Saints climb the Premier League standings and move towards safety.
"This will probably be our biggest game of the season," Shaw said of Saturday's visit to Villa Park.
"We know that we can beat them so, if we go there and play our game, I’m sure we can get three points.
"We have a few games coming up that we can go and get points from and I believe we can do that.
"I think we will stay in the Premier League. We have been playing some superb football but the luck hasn’t gone our way recently."