The 22-year-old enjoyed an excellent season for Vitesse last term, scoring seven goals in 35 Eredivisie appearances.
He was rewarded with a first call-up to the Netherlands' squad, although he has yet to receive a cap and is not part of Louis van Gaal's World Cup selection.
Commenting on his new deal, Propper told Vitesse TV: "I'm really happy.
"Last season was my best season. So I want to continue (here)."
Vitesse technical director Mo Allach added: "Davy has had an outstanding season.
"His qualities are obvious and he has developed into a key player."
