The highly-regarded left-back, rated among the best outside the top flight, was not due to see his current deal expire until the summer of 2015, but has put pen to paper on a fresh three-and-a-half-year deal.
Cresswell, 23, has previously been linked with several Barclays Premier League suitors including West Brom, Aston Villa and Everton.
He told Town's official website: "I had about 18 months to run on my contract so obviously I'm delighted to have extended that.
"I am really enjoying my football here. There is a good feel about the place and it's enjoyable coming to work every day.
"I feel I have progressed as a player and, like any professional, I want to get to the top and that means playing in the Premier League. Hopefully I can do that with Ipswich."
Cresswell arrived at Ipswich from Tranmere in 2011 and has made a total of 111 appearances to date, scoring seven goals for the Suffolk outfit.
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- Barclays Premier League