The 25-year-old, who joined Blues from local rivals Aston Villa in August 2007, is now tied to the St Andrew's club until 2013.
Versatile Ridgewell had a remarkable 2009/10 season after overcoming a broken leg in April 2009. The defender made the left-back berth his own and popped up with a number of vital goals for Alex McLeish's side.
Ridgewell has made a total of 113 appearances for Birmingham, scoring seven goals.
The defender is the second player to sign a new deal at St Andrew's this summer, with goalkeeper Maik Taylor penning a fresh one-year contract in May.