The 19-year-old defender, already a Wales Under-21 international, progressed through City`s youth ranks before penning his first professional contract last summer.
Alfei went on to enjoy a successful senior debut against Colchester in the FA Cup in January before making his Championship bow against Crystal Palace a week later.
The Swansea-born right-back has made a total of three appearances for the club this season and, speaking about his new deal, he told City`s official website: "I`m delighted.
"It`s good to know the club has the faith to offer me a three-year deal. And as far as I`m concerned, there is no better place for me to be playing my football.
"I think I`ve improved a lot this year by training and playing with such a quality squad. The gaffer (Brendan Rodgers) has helped me develop. He is always talking to me and telling me where I am and where I need to be. His coaching methods have also brought my game on a great deal."
Source: PA
Source: PA