The new deal will keep the 20-year-old at Boro until the summer of 2015.
“I inherited Jason as No.1 goalkeeper and he has never given me any reason to reconsider that position,” manager Tony Mowbray told the club’s official website.
“He makes impressive saves, he has a great work ethic to his training and he has a wonderful temperament. I hope he can be a success as Boro’s goalkeeper for some years to come.”
Steele said: “I’m delighted to have signed so I can now concentrate on helping us get out of the situation we find ourselves in and then push on for bigger and better things.
“I told the manager that this is where I want to be and where I want to play football. That was all he wanted to hear and it was all sorted very quickly.”
