The new deal means Cooper, who has been in scintillating form as the Reds have surged to the top of the Super Rugby ladder, will remain in Australia until the end of the 2012 season at least.
Cooper said: "It's an exciting time to be part of Australian Rugby with the Reds going so well and the World Cup coming up, so I'm glad everything is now squared away.
"The vibe within the Reds team and the support we're getting from our fans is incredible and I'm proud to be part of it going forward."
Cooper, who was last year's 2010 Australian Super Rugby Player of the Year, has continued his form into this year and is currently the competition's leading point-scorer.
Reds coach Ewen McKenzie is delighted to have his star number 10 tied up for another year.
"Everyone notices the freakish aspects of Quade's game but all those highlight moments start from the hard work he puts in off the field," McKenzie said.
"No-one works harder than Quade and his rise in world rugby hasn't come by accident.
"Our playing group is building nicely for next year and beyond, and Quade is just one of many excitement announcements we plan on making in due course."
Cooper is the 17th player to re-sign with ARU this year ahead of the upcoming Tri Nations and Rugby World Cup tournaments.
"I'm delighted we've extended Quade's tenure in rugby beyond this year's Rugby World Cup because I believe there are some wonderful times ahead for him and this young Wallabies team," ARU chief executive John O'Neill said.
"Quade and his halves partner Will Genia have become superb and consistent contributors to the Reds and the Wallabies and it's hard to imagine a better double act in world rugby.
"Quade delivers an X-Factor, that is undeniable."
"He has that rare ability to excite an audience and have a defence on alert every time he touches the ball."
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