The 21-year-old won his 17th cap in the 47-29 defeat to New Zealand at the weekend and will now stay with the Australia team as they prepare for the World Cup in 2015.
"To have clarity over what I'll be doing the next couple of years is great and I'm stoked to be staying in Australia and playing with the Waratahs," Hooper said.
"Every time you play for Australia you are representing your country and your family, so it's a huge honour to pull on the jersey.
"It is the pinnacle in our sport and the more you get to do it the better.
"You look at the guys who have played 50 and 100 games and they're legends in our sport and in this country. Everyone is trying to strive towards that.
"There is also a really positive feeling within the group at the moment despite the result on the weekend not going our way. I really enjoy the way we are playing and it's a very fun way to play the game."
Hooper made his debut against Scotland last June and went on to claim the Australian player of the year award.
"The job of the Australian Rugby Union and the provinces is to secure talent and Michael is a good example of an outstanding and consistent young player putting his hand up and coming to terms," Australia coach Ewen McKenzie said.
"I'm really pleased about that and it's a good sign for Australian rugby in the long haul.
"He is a guy who contributes every week and for example was players' player on the weekend against the All Blacks.
"He makes things happen in a game and is the ideal player to keep around.
"We've got a bunch of young guys who are emerging on the scene but in terms of 'Hoops' he is playing against the best players in the world and stands out.
"He clearly showed that on the weekend and was influential in all aspects of the game. He is a good example of a player who is accruing experience and the sky is the limit."
- Sports & Recreation