The new four-year deal will keep the 26-year-old at The Hawthorns until the summer of 2016.
West Brom boss Steve Clarke said: "After strengthening the squad during the transfer window, itís equally important to hold onto your best players and Iím delighted James has signed a new deal.
"The new contract is fair reward for Jamesí hard work and efforts.
"Heís been here a number of years now and has always been one of the key players.
"This is a good message to send to the rest of the squad, that if you do well and keep improving you will be rewarded.
"Itís also a big coup for the club because Iím sure that if James was on the market, thereíd be a few clubs interested in him."
West Brom's sporting & technical director, Dan Ashworth, added: "Iím delighted James has committed his future to the club for the next four years.
"Heís been one of our most effective players in the Premier League over the last couple of seasons and fully deserves his improved deal.
"The fact weíve got a player of Jamesí calibre to sign a longer contract is a sign that the club is moving in the right direction."