After impressing in the club's reserves, the winger made his Premier League debut in the 3-0 win at Wolves last season.
Forshaw was also involved in a number of David Moyes' matchday squads and that was sufficient to earn a new deal.
"I just want to keep improving, play every game for the reserves and hopefully start making the first team squad a bit more often," the 19-year-old told Everton's official website.
"From there you can maybe get on the pitch a bit more, pick up those bits and pieces and keep pushing on.
"You don't just burst on through, it is not like that, but if you keep working at it and playing for the reserves then you can do it gradually."
Source: Team Talk
Source: Team Talk