He has represented Ireland U21, Ireland A and won his first senior international cap against Italy in last season's RBS 6 Nations. He was selected on Ireland's tour of North America where he played against both the United States and Canada.
"When I was growing up, all I wanted to do was to play rugby for Ulster," said Marshall. "I have been fortunate over the past seven years to do just that and I am extremely pleased to know that I will be representing my Province for at least another three years.
"To be able to play in front of friends and family is very special. I am passionate about playing for Ulster and I love what it represents.
"With the squad that we have at the present time and the redevelopment that is going on at the ground - Ravenhill is an exciting place to be."
Ulster's Director of Rugby, David Humphreys was delighted to retain the services of the scrum-half.
"Paul is an extremely important member of our squad and I am delighted that he has opted to stay with Ulster for three more years," said the former Heineken Cup winner.
"To compete in the knock-out stages of both the Heineken Cup and the RaboDirect PRO12, we need depth in all positions throughout the playing squad and retaining another international scrum-half is an important part of achieving that."
Ulster continue their European campaign with an away trip to Pool Five leaders Montpellier on Saturday.