Isgrove has been at Saints since the age of nine, progressing through the ranks to make his debut in last October's Capital One Cup clash at Leeds.
The 20-year-old was named in the squad for the final two Barclays Premier League games of last season and has signed a new contract at St Mary's.
"Lloyd has shown a great deal of potential during his early years with the club, and he deserves this new contract in recognition of the hard work he puts in," manager Mauricio Pochettino told Southampton's official website.
"He has impressed me in his performances for the under-21s and with his attitude on the training ground, having taken part in first-team sessions regularly last season.
"He now has the chance to demonstrate at senior level the qualities he has shown during his time with the academy and development squad."
Isgrove has travelled with the first-team on a pre-season trip to Spain, where he is joined in the squad by fellow academy graduate Luke Shaw.
The highly-rated left-back turned 18 on Friday and Press Association Sport understands he will now sign five-year contract with the club, although no official confirmation has been made.
- Sports & Recreation
- Mauricio Pochettino