The Israel striker is a popular figure at the Amex Stadium after playing a key role in the team's promotion into the Premier League last season.
One of only a few attackers currently on the club's books, Hemed scored two goals in seven matches this season, before blotting his copybook with a red card that resulted in a three-match suspension.
Hemed said: "I was part of the team that got promoted and now I can be happy and enjoy the Premier League with Brighton.
"I wanted to show the club that I can play at this level.
"In the summer no-one knew what was going to happen to me and until the last day it was still an option that I would leave.
"Sometimes it happens in football and as a professional you need to deal with the situation.
"I am happy I started the season well and it has made the club take the decision and shown me they are happy with me and want me for longer."
Brighton are next in action in Monday night's televised clash at home to Stoke City.
