The Nigeria international signed from Israeli side FC Ashdod on transfer deadline day in August 2012 and his new contract will keep him with the Scottish champions until 2017.
Ambrose has been a huge hit since signing from Israel and there were transfer rumours after last season that he could move to Liverpool in England.
He helped his Scottish side reach the last 16 of last season’s Uefa Champions League and helped the Glasgow side famously defeat Barcelona 1-0.
"I have thoroughly enjoyed my time at Celtic so far and I am absolutely delighted to extend my stay at such a fantastic club,” Ambrose told the club’s site.
Ambrose has played seven times in the league where they are in second position with 19 points and seven times in the Champions League where he has scored one goal.
Ambrose is expected to link up with the Super Eagles for the World Cup qualifier against Ethiopia in Addis Ababa on October 13.