The 28-year-old, who arrived at the Bristol County Ground in 2013 on a permanent basis following a successful loan spell, will now remain at the club until 2018.
Smith, a former Sussex, Surrey and Middlesex player, played an integral role in Gloucestershire winning the Royal London One-Day Cup last season and impressed in the NatWest T20 Blast.
“I’m extremely pleased and excited to have signed a new contract,” Smith said.
“The next three seasons are big ones for this club, building on the Royal London One-Day Cup win. It is a very young group of players and we are all keen for further success.”
While he took the most wickets in the Blast group stages in 2015, Smith’s biggest impact came in the RLODC final against Surrey at Lord’s.
After contributing 20 to a sixth-wicket stand of 52 with Geraint Jones to rescue his side from 108 for five, Smith took 2-42 from 10 overs with the ball to help Gloucestershire claim a dramatic six-run victory.
Now Smith, who has taken two hat-tricks while playing for Gloucestershire, is looking to take his limited-overs form into the County Championship.
“I’ve been very consistent for the club in the white-ball forms since I arrived,” he said. “One of my main focuses is to get back into the four-day side and really contribute there.”
Smith has joined Michael Klinger, Benny Howell and Roderick in committing to Gloucestershire, who have also attracted the likes of former Sussex left-arm seamer Chris Liddle and Australian death bowler Andrew Tye to the club this winter.
“We are a very tight-knit bunch, we all in it together, we all want to stay together and bring success to the club,” Smith said.
“The more we can keep players and also attract players from other counties – Chris Liddle is a great signing, getting Andrew Tye in who’s now been called up for Australia – it just shows that getting a few wins on the board does help bring in players.
“The more we win, the more exciting it is and the easier it is for Richard Dawson and Will Brown to bring players in.”
Head coach Richard Dawson added: “It is great to have him extend his contract. He has been a mainstay of the one-day and T20 sides since coming to Gloucestershire and he was a very influential player for us in white-ball cricket last year.
“He is also a valued member of the changing room and I am sure he will continue to contribute across all three formats of cricket over the next few years.
“We want to build on the success we had last season. Keeping the squad together is crucial part of that so to have Tom and Gareth Roderick both extend their contracts is great news for the club.”