The 28-year-old was an ever-present in the side which won the County Championship title in 2016.
"He is one of the finest cricketers in the country," managing director of cricket Angus Fraser said.
"As a glove-man there are few better than him and he is capable of producing match-changing innings with the bat."
Since making his debut for Middlesex in June 2009, Simpson has made almost 250 appearances in all formats.
The left-hander has scored 6,687 runs for the club and has 472 dismissals to his name.

Nats Prestwick expects to handle more than 250,000 flights during the peak holiday season this year - an increase of 15,000 on last year.
The company has announced a Â£600m investment in a new computer system.
But it says government support is needed to improve the network of "ageing" flightpaths.
Paul Peers, head of development at Nats Prestwick, said: "We are predicted to have the highest amount of traffic we have ever had for a summer period this year.
"We are expecting to have around 15,000 more flights just in July and August compared to last year.
"We are ready for that and our controllers have been doing a great job up to this point making sure that we minimise the delays that people see and making sure that we keep people safe in the skies.
"We have been preparing for this since November, so the summer doesn't come as a surprise to us, and we have a series of events to make sure our controllers are ready for the summer traffic.
"Indeed, this year, the build-up in traffic has helped us with that because we've had record days already that our controllers have dealt with extremely well.
"But one of the big challenges for us is the design of the airspace in the future and the traffic growth."
He added: "We are investing over Â£600m over the next few years in the technology systems.
"In fact, at the Prestwick centre we are proud to say that we have the first version of iTec, our new flight data processing system, in operation already and that is the first in the UK.
"The skies are getting fuller every year and we are expecting to see increased traffic growth.
"But if you think about the airspace as effectively motorways in the sky, if you think about 1970s motorways with today's car traffic, we are in a similar scenario.
"We are going to have to redesign our airspace and we are going to need government support to make sure we can do that in the right way."

The "call for sites" forms part of the second stage of a comprehensive review of the island's planning strategy.
The department has stressed that no guarantees will be given as to where development can take place, but it wants to assess the potential.
Islanders have until 17:00 BST on 13 September to submit applications.
The information will help form the Strategic Land Use Plan.
Two main areas have already been deemed suitable for development in Guernsey.
These are St Peter Port and St Sampson/Vale, which have already been extensively developed.
There are 10 further areas which are under consideration as "local centres", where development will be encouraged in order to provide housing and employment opportunities.
Only submissions relating to these areas will be considered.
Details of successful and unsuccessful submissions will be published in the final review, meaning there will be no confidentiality other than in respect of contact details.
Information about the consultation and the submission form required have been made available on the department's section of the States website.
Middlesex wicketkeeper-batsman John Simpson has extended his contract, keeping him at Lord's until the end of the 2019 season.
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The national air traffic service (Nats) has said a "massive" programme of modernisation is needed to keep up with demand for air travel.
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Guernsey's Environment Department has invited islanders to identify the parcels of land that could be suitable for development.