The Australia Under-21 international has just 18 months left of his previous deal.
Herd’s new deal will keep him at Villa Park until the summer of 2015.
Villa boss Alex McLeish said: “Chris is in the team because he has deserved a chance. He has been a good anchor man in the team. He keeps the game simple.
“He’s shown that you can force your way in, and I want other players who are willing to kick the door down and make me pick them.
“That was the message I gave to all of them at the start of the season, and that is what Chris has done.
“He’s a whole-hearted boy. He has fantastic application. He trains like a beast every day and is a good role model to any player in terms of his attitude.
“He is improving all the time, and that’s partly because he’s getting first team football.”
Herd said: “I was born and raised in Australia and I love the country and I just want to represent them.
“Tim Cahill is the player who inspires me most. He came from Millwall and now is playing for Everton and Australia.
“He is the great model I look up to. After his move to Everton, he’s been a star in Australia.”
