The 20-year-old Berahino, who has made his name with six goals in ten matches for Albion this season, including a winner at Manchester United, has also scored six goals in four games for the England U-21s.
Berahino has been with the Baggies since the age of 11 and technical director Richard Garlick said: "It was always our intention to reward Saido for the huge strides he has made over the past few months.
"To be able to reward one of our proteges, who has worked his way up through the ranks from the age of 11, is a great moment for the club.
"It's a fantastic story for us and especially for our hard-working academy staff, who have played a fundamental role in his development over the years.
"Producing one or two players who can supplement the first team is something we want to achieve every year.
"We hope this is the start of that process as we feel we have a number of other young, exciting players coming through."
However, Garlick warned Berahino not to get carried away.
"It's difficult for any 20-year-old to get into a Premier League side and there are going to be times when Saido may not be playing as much as he would like to.
"He's not the finished article and he has to remain patient, as we do with him.
"But he has done exceptionally well to get where he is and he now has to focus on what got him here -- hard work and keeping his feet on the ground."