The 23-year-old made his debut in 2018 and has signed a deal which will see him stay at Headingley until the end of 2021.
Thompson said: “This is my home club. I’ve been here since I was nine years old - playing as a professional for the last two or three seasons.
“To have signed for two more years is a massive accomplishment for me. Hopefully, we can win some silverware with the club in years to come.
“My ambition has always been to play more first team cricket and secure my future at Yorkshire. I didn’t have to look elsewhere.”
The player made two appearances for Yorkshire last season in the County Championship, claiming five wickets at an average of just 21.
Thompson admitted that things didn’t go Yorkshire’s way in 2019, however, and hopes that will change next time around.
He said: “We had our ups and downs. We had some good moments with some young lads coming through, making their debuts and doing really well. We didn’t get the silverware that we wanted but we’re looking forward to some new players coming in.
“You never go into a season thinking you’re not going to win anything - more so now, we’re looking to get on a roll and start winning some silverware and defending it in years to come.”