The 24-year-old Portugal full-back is expected to command an important role under new Saints boss Claude Puel, especially with Jeremy Pied sidelined through knee trouble.
Cuco Martina could move to Everton once Pied recovers, though Saints are waiting to determine the extent of Pied's problem before sanctioning that transfer.
Saints are still expected to bring in Lille forward Sofiane Boufal before the end of the transfer window, while the south-coast club also recruited goalkeeper Stuart Taylor on a free transfer on Friday.
"Since his arrival at the club Cedric has gone from strength to strength, ending his first season in England with a memorable Euro 2016 for Portugal this summer," said Southampton's executive director of football Les Reed.
"At just 24 he now has plenty of experience under his belt at both club and international level, and we believe he will continue to be a key part of the club's progression for many years to come.
"Although Cedric has only been with the club for one season, he has developed as a player and gained a real understanding of what is required to succeed in the Premier League."
Saints will seek their first Premier League win of the new campaign at the third time of asking in Saturday's clash with Sunderland at St Mary's, with new boss Puel boosted by Soares' new deal.
"It's good news for the club, for Cedric and for all the team," said Puel.
"He is an international player, he has won Euro 2016 with Portugal and it's important for the club to keep players of his calibre.
"I'm happy for him and for us to keep Cedric with this team
He is a good player, important, a technical player and I am sure he will do many good things this season."
Defender Soares admitted he has built his confidence thanks to Southampton's faith in his abilities.
"I'm really happy, the club has given me more confidence and they show me that they also trust in my football," he said.
"I am really happy to be part of this club and be part of this family as well."
Saints backed up the new deal for Soares by completing terms on a one-year deal for ex-Manchester City and Leeds goalkeeper Taylor.
The 35-year-old will offer cover for Fraser Forster and Alex McCarthy, after Kelvin Davis' retirement and Paulo Gazzaniga joining Rayo Vallecano on loan.
"With Kelvin retiring this summer and with so many games this season Stuart's arrival will provide us with added depth," said Reed.
Source : PA
Source: PA