The U.S. national team stalwart, who has been at the club since leaving Manchester United in 2007, is now due to remain there until he is 39 years old.
"He has been vital to our overall achievements," manager Roberto Martinez told Everton TV. "It's not just about his performances. As a goalkeeper, you have a big say about what happens in your own goal and to keep the amount of clean sheets that we have this season — which is already two more than last season when we had very good numbers defensively — is impressive.
"Then you see his human values and the way he affects youngsters — he is the perfect role model for our football club. We have a good group of young goalkeepers who can follow that sort of example and that is why it's so significant he has agreed to stay with Everton for a long, long period."
Howard has made 33 appearances in the Premier League this season, recording 13 shutouts while putting Everton (19-6-9) in contention for a berth in the UEFA Champions League.
The goalkeeper, who began his professional career playing for the New York/New Jersey MetroStars from 1998 to 2003, has accumulated 97 caps for the USA and is set to participate in his third World Cup this summer.
"To have Tim Howard performing as he has been this season, I cannot see past him to choose the best goalkeeper in the league," Martinez said. "For him, in such an important year with the World Cup around the corner, to commit his future for the long term is an incredible moment for the dressing room.