Wasps' Young Player and Academy Player of the Season made six Premiership appearances this season - two as replacement - including his first start against reigning champions Leicester Tigers in February.
Launchbury said: "I'm pleased that the club has shown faith in me by offering me a lengthy contract and I was delighted to sign it.
"From a personal point of view this season has been great for me and I didn't think I would get as many first team opportunities as I have.
"I've got a lot to learn and with the quality of coaching we get at Wasps as well as the experienced players I have around me, this is the right place for me."
The versatile second-rower, who can also play on the flank, will travel to Italy next month hoping to play a big part in England's Junior World Cup campaign.
Launchbury will be aiming to provide competition in an aging Wasps second row for Simon Shaw, Marty Veale and Richard Birkett, as well as fellow youngster James Cannon.
Wasps head coach Shaun Edwards added: "It is marvellous news for the club that Joe has signed a new deal.
"Players like Joe are the future of London Wasps and he is a dedicated professional who works incredibly hard on all aspects of the game.
"He is improving all the time and hopefully that can result in him having a very successful career at all levels."