The new deal will keep the 26-year-old at Villa Park until 2023 and he is looking forward to the new season after helping Villa win promotion back to the Premier League.
He said on Twitter: "Absolutely delighted to have signed a new contract at this great club. Bring on 2019-20! @AVFCOfficial."
Steer spent the first half of last season on loan at Charlton but returned to Villa on December 31 and played a key role in the club's promotion via the Sky Bet Championship play-offs.
He was part of Villa's record run of 10 successive league wins between March and April and saved two penalties in the play-off semi-final shootout victory against West Brom at the Hawthorns in May.
Steer, who made 19 appearances for Villa last season, has been at the club for six years after arriving on a free transfer from Norwich.