Collison, 22, made his debut against Arsenal on New Year's Day in 2008 and has since made 53 appearances for the Hammers.
The Wales international spent a large part of last season on the sidelines with a serious knee injury but is now fully fit again and desperate to make up for lost time.
"Obviously it's great for me personally to know that I can now get my head down and concentrate on my football," he told the club's official website.
"That's the most important thing for me to do now - get my head down, do my business on the pitch and have a good season.
"It's nice to have the security of knowing my future is with West Ham United. I look around and see what they are building and I want to be part of the future. Fingers crossed, I'll work hard and hope I can do the business."