"It's one of those things that took a bit of time, but we got there in the end and I'm very happy to be here for the next part of my career," the 26-year-old told the club website (www.whufc.com).
West Ham said several leading European teams had expressed an interest in Reid, who joined the London club in August 2010.
Tenth-placed West Ham, who lost 1-0 at home to Premier League leaders Chelsea on Wednesday, are without a fixture this weekend.
Reid has become an integral member of West Ham's defence since joining the London side from Danish team FC Midtjylland in 2010, making 131 appearances and scoring six goals.
The defender has made 27 appearances this season to help West Ham into the top half of the Premier League table, though they are without a win in five games ahead of Thursday's clash with leaders Chelsea.
