The 23-year old, who started all five of Wales' recent Six Nations games, will stay at the Liberty Stadium until at least the end of the 2015/16 season.
"This is an organisation that has always been very good to me and supported me so it's great that I can recognise that by committing my future to the region," said Biggar.
"It's always nice to get things sorted and to be all done and dusted. Now I've signed, it means I can concentrate on the next few weeks and helping the team to secure a play-off place without any distractions."
Biggar made his senior Ospreys debut as an 18-year old in an EDF Energy Cup semi-final win over Saracens at the Millennium Stadium in March 2008. His first start then came in an away win over Glasgow in September that year.
Since then, he has flourished in the Ospreys environment with his durability and consistency in the number 10 shirt allowing him to reach some considerable landmarks for the region.
In November 2011, less than a month after his 22nd birthday, he overtook James Hook to become the region's all-time highest points scorer, a record he has since extended to 1,206.
And in April 2012, he became the youngest ever Osprey to reach 100 regional caps.
Biggar added: "I think both parties are very happy with where we are and can really look forward to the future positively. The Ospreys wanted to keep me and I wanted to stay so it's always been a case of agreeing on a few things.
"This is a great environment with fantastic facilities and great coaches. It brings the best from you as a player and I consider myself fortunate to have come through this system to represent my home region. That's very important, as you have to be happy in your environment, wherever you are."
The ninth player to have signed a new deal with the region this season, Biggar has followed the likes of Lloyd Peers and Rhys Webb in committing to the Ospreys.
And after establishing himself as Wales' first choice fly half in the recent Six Nations campaign, Biggar is looking for more success at both national and regional level.
"My aim is to be competing for trophies with the Ospreys every year. I've discussed this at length with the coaches and management here," he added.
"There are a lot of good players here at the Ospreys. We've got experienced, quality senior players and some exciting youngsters coming through and we've shown that we can get the right blend to be competitive.
"There's no reason why we can't continue developing from within while competing with the best. I'm excited about what we can potentially achieve as a group."