His performances that season earned him an England call-up for the friendly with Greece in August 2006.
But he broke his ankle in training for that game and missed the whole of the 2006-07 season, and also suffered injuries in the 2007-08 season.
"I didn't play as many games as I wish I could and obviously I missed the season before," he said.
"I am really excited about next season. I feel I can only get better so I am really glad that I have signed and can look forward to the future.
"I think after the injury I had as well, it is nice the club have managed to agree with me on a new deal.
"We are really looking to the future."
Hammers chief executive Scott Duxbury said: "I am delighted that we have agreed this new contract with Dean. It underlines the ambition of the club to progress and challenge at the top end of the Premier League."
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