The 23-year-old midfielder, who scored 10 goals in 39 games last season, will form a crucial part of the Terriers' promotion effort next season.
Manager Lee Clark told the club's official website: "Michael has the whole package; he has a fantastic attitude, he trains extremely hard every day and gives his absolute best in every game.
"He is looking to improve and that fits in perfectly with the strategy I am working on. I want young hungry players who are always looking to get better and progress up the league.
"He also has the unique habit for a central midfielder - he scores goals regularly. He got into double figures last season but it didn't detract from the other attributes you need as a central midfielder."