Daniels has enjoyed a fine season with the Cherries, having started 25 of the 26 Barclays Premier League matches.
The left-back joined permanently from Leyton Orient in 2012 and has since been a near permanent fixture in Eddie Howe's side.
"Charlie has been a model of consistency for me this season," Howe said.
"He has been very, very impressive and really set the marker for us. Not only on match days but also in training.
"He deserves this deal and hopefully it's another step towards what will be a successful season for us."
Howe was also quick to praise the improvement Daniels has shown this term in stepping up to life in the Barclays Premier League.
"He has really elevated his game to a new level this season," he continued.
"That's not easy when you take into consideration the kind of wingers he is coming up against every week.
"But he has been at his peak physically and I believe that has really helped him. He deserves this new contract."
Cherries Player HD subscribers can watch an exclusive interview with Charlie Daniels discussing his new contract here