The duo have put pen to paper in the aftermath of Blues manager Alex McLeish signing a new deal 10 days ago.
The Watsons have played an integral part in City gaining promotion from the Championship and establishing themselves in the Premier League.
England number one Joe Hart has constantly praised Dave Watson for the part he played in improving him as a keeper during his season long loan at St Andrew's from Manchester City.
Andy Watson said: "First and foremost, everything revolves around Alex and once the club came to his agreement on his contract, then we could move forward together.
"Myself and Dave were delighted the owners looked at our contracts.
"I think that was a recognition of the work we are all trying to do here and what we have done as a group over the past couple of years.
"We came back up from the Championship and are trying to get established as a Premier League side, as difficult as that is, and will continue to work hard to achieve that."