The new deal will keep the 20-year-old at Fir Park until the summer of 2013.
Murphy has impressed for Motherwell this season and is expected to be a key player again next season.
He told the club’s official website: “I am delighted to extend my stay here. Motherwell has become a really big part of my life.
“These next three years are probably going to be the most important in my footballing career as I continue to learn my trade.
“There’s no better place to do that, in my opinion, than here at Fir Park.
“I’ve been at the club for nearly 10 years so agreeing to another three wasn’t hard.
“Particularly because Craig and Archie are going to be here too, they are excellent coaches who you really want to work with.
“My aim now is to hold down a regular first-team spot and score as many goals as I can for the team.”
