The 27-year-old midfielder initially joined on loan from Aston Villa earlier in the season before making that switch permanent in January.
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"We're delighted that Stephen has committed himself to us. He's an outstanding player; I think we've seen that in the time that he's been with us," Hughes told Stoke's official website.
"He's someone I've worked with before and that will help Stephen because he enjoys working in a stable environment where he knows people. I think that gets the best out of him and we'll reap the benefits of that and I think the next few years will be great for him.
"He's still a young man and we're arguably getting him at a time in his career when he should be at the peak of his powers. I think it's a great opportunity both for Stephen and the club."
Ireland's career has been revitalised since linking up this season with former boss Hughes - who managed him during their time together at Manchester City.
City chief executive Tony Scholes added: "From talking to Stephen it's evident that he has really enjoyed his time with us so far.
"He was grateful for the opportunity we gave him to play first-team football on a regular basis again and we are pleased to have secured his services for another three years."