The goalkeeper is rated highly by Utrecht and impressed coach Foeke Booy in his seven first team appearances last term.
Utrecht, aware the 24-year-old's deal was due to expire in 2005, were determined to tie him down to a long-term contract and offered him new terms.
Terol was surprised the club offered him such a long contract, but wasted little time in putting pen-to-paper.
"I'm happily surprised that the club want to continue with me for so long," Terol told the club's website. "To become first goalkeeper is the most important thing and that can happen here."
Booy is looking for Terol to fight for the number one jersey in the new season.
"Joost is talented and proved himself last season," said Booy. "The coming season he has to compete with Rene Ponk for who will become first choice."
