The 21-year-old Wales international, currently on loan at Crystal Palace, would have been out of contract in the summer, but his new deal extends his stay through to 2016.
He said: "I'm delighted to have signed a new contract at the club. Being a Swansea boy, I see my career at the club and I was very keen to commit my future to the Swans."
Richards made eight Premier League appearances last season, but had been limited to four first-team appearances in cup competitions under Michael Laudrup before making his temporary move to Selhurst Park.
But the full-back, who featured as a substitute in Wales' World Cup qualifying defeat to Croatia, was more than happy to sign on for another three years at his hometown club.
"By offering me a three-year contract, the club made me feel they have a plan for me," he said.
"There was interest from other clubs but Swansea is where I want to be.
"The plan is to finish the season strongly and try my best to get Palace into the Premier League, and then I'll return to Swansea and look to impress Michael Laudrup enough to be involved regularly in his first-team plans."
Source: PA
Source: PA