Morsy captained the Tractor Boys through back-to-back promotions from League One to the Premier League, making 131 appearances in which he scored nine goals from defensive midfield.
The 32-year-old is now set to become the 12th Egyptian to play in the Premier League and the only current second Pharaoh in the top tier alongside Mohamed Salah.
Speaking on the contract renewal, Morsy told TownTV: “To extend my stay at this special club is something I’m really proud of.
“I’m going into my fourth season at the club now and we’ve had unprecedented success during the last two years, which is something I’m honoured to have been involved in.
“It’s great to feel the club and the manager’s commitment to me at such an exciting time for everyone, as we prepare for what is the biggest challenge of them all.”
Manager Kieran McKenna also reacted to the news, revealing his delight to be able to tie the club captain to a new deal.
“We are delighted Sam has extended his contract with the club as we prepare to enter the Premier League,” McKenna said.
“Anyone who has seen Sam play will know how consistent a performer he has been over a significant period of time. Morsy’s consistency has been vital in everything we have been able to achieve together over the last two seasons.
“The leadership he has shown has been key in building a strong culture, which underpins everything we do. I know Sam is excited to now have the opportunity to test himself at the highest level of the game.”
Morsy will be hoping to help Ipswich stay in the Premier League next season after helping the club return to the Premier League after a 22-year absence.
The club already made a number of key signings, including Omari Hutchinson from Chelsea and Liam Delap from Man City. The also added goalkeeper Arijanet Muric from Burnley, Hull city center back Jacob Greaves, and fullback Ben Johnson as a free agent.