The former England Under-20s scrum-half initially signed a one-year deal after moving to Northampton from Saracens last summer.
But he has been a big success during his short time at Saints, impressing during the early part of the season in the absence of Cobus Reinach and Alex Mitchell.
Supporters' and players' player of the year Reinach was away at the World Cup with South Africa, while young player of the year Mitchell remains sidelined with a knee injury.
And Taylor has more than taken his chance, making 10 appearances in black, green and gold so far, starting on seven occasions and scoring twice.
The 25-year-old would have more Saints games under his belt but endured a spell out of the side after breaking his thumb at Bath in early November.
But he returned to action during the win against Gloucester on December 28 and has played a part in two successive Gallagher Premiership wins for second-placed Saints.
And the coaching team have wasted no time in making sure Taylor stays in Northampton for the foreseeable future.
“Henry’s already proved to us that he’s got what it takes to challenge for the No.9 shirt so we’re delighted to see him stay," said Saints boss Chris Boyd.
“We’ve got a great group of young scrum-halves coming through.
"They’re pushing each other to be better every day and I have every faith Henry will remain an important part of this squad over the next few seasons.”