United boss Jose Mourinho had been keen to tie down the highly-rated 18-year-old, who has impressed him during his time at Old Trafford.
And Fosu-Mensah's new deal means he will stay at the club until 2020 - with the option to extend for a further year.
Mourinho told United's official website: "Tim is a young player with great potential
I am pleased that he has signed a new contract and I am delighted at the progress he has made so far.
"It is clear to see that he is learning every day in training and there will be plenty of opportunities for him as the season continues."
Fosu-Mensah joined United in 2014 and worked his way through the academy and Under-21 teams before making his Premier League debut against Arsenal last season.
He also impressed when he started against Ukrainian side Zorya Luhansk in the UEFA Europa League last month.
Fosu-Mensah said: "I am delighted to have signed a new contract here at Manchester United
"I have enjoyed every minute since I joined this great club and I want to continue the progress that I feel I have made so far
"I am learning every day from the manager and the coaching staff
I appreciate the trust that the club has in me and I want to repay that with my performances on the pitch."
Source : PA
Source: PA