Fussell made the move from the Newport Gwent Dragons in the summer in a deal that runs until the end of the 2011/12 season and his new extension will see him remain at the Ospreys until the summer of 2014.
"I'm over the moon" said the second top try scorer in the Magners League.
"It just shows the faith that the coaches have in me to do my job on the field and as a player you can't ask for anything more.
Coming here in the summer was the best decision I've made so far in my career, 100 per cent. I'm loving my time at the Ospreys.
"I always had confidence in my ability to succeed, I'm just grateful for the opportunity that I've been given here and I've grabbed it with both hands. I'm working with top class, experienced players day in, day out, and the move is really paying dividends for me.
Merthyr born Fussell made a try scoring debut for the Ospreys against Ulster on the opening day of the season and he has racked up seven so far this season and head coach Sean Holley is full of praise for the flyer.
"The new contract is a reward for Richard's performances and attitude since he joined us, which have been exemplary," said Holley.
"He is somebody we viewed as having a level of consistency and the ability to push his game forward, which he has already done in just half a season.
"He's had a lot of rugby under his belt in his time, but he suits our style of play and has adapted to it really quickly. We're delighted with him.
"He's taken his chances and he's proved that he's not just a safe pair of hands in the absence of Shane, he's a very real threat to the opposition. He scores tries, he's attack minded and he's got a kicking game. He's also able to do good work in and around the tackle area, which is very important for an outside back."