The 24-year-old defender's existing deal was due to expire later this month, but he will now remain at Roots Hall for another year.
Prosser made 27 appearances for the Essex club last season as the narrowly missed out on automatic promotion before losing out in the play-off semi-finals.
"We had the option of giving Luke another year and that's something the management have decided to do," club spokesman said. "Luke is someone who can play in a couple of positions at the back and the management like his attitude and professionalism as well.
"He's someone who has really improved in the last couple of seasons and we look forward to welcoming him back next year."