The 23-year-old, brother of Real Madrid newcomer and World Cup winner Toni Kroos, had a year left on his previous deal and had no hesitation in extending his stay at the club.
"I feel very comfortable here and want to establish myself further," he told the club's official website.
"Personally I see at Werder the best perspective for the future. I am glad to continue to be a part of this great team. We have felt an overwhelming team spirit in the team and it is every day that we pursue a common goal,"
Kroos, who joined Werder from Hansa Rostock just over four years ago, made 20 Bundesliga appearances for the club last season and scored his first goal in the German top flight in a 3-1 defeat at Schalke last November.
Werder managing director Thomas Gauge is delighted that Kroos opted to commit his future to the club.
He said: "With the extension of the contract of Felix, we have secured a building block for the development of the team again.
"He is a hugely important player in our ranks and has a strong development behind him. I am glad that we can plan with him in the coming year."