The right-arm seamer has made an enormous impact since joining the club full-time in February.
Sanderson has taken an impressive 44 wickets this season with an average of 21.77.
His career best came in the County Championship Division Two game against Glamorgan last month, when he took seven for 22.
The 27-year-old also played an important role in the NatWest T20 Blast finals day triumph, taking three for 31 in the showpiece against Durham Jets.
And Sanderson said: “I’m delighted to have signed a new three-year deal with the club.
“I’m very much looking forward to playing with these boys for more years to come.
“The club has huge ambitions to improve in the County Championship and that’s something I can’t wait to be a part of.”
And Northants head coach David Ripley said: “Sando is a great story, getting a second chance from minor counties cricket and turning that into a three-year deal.
“He is a very skilful bowler and very popular member of the squad.”