The 19-year-old made his professional debut in Saints' 3-1 win at Crystal Palace on Boxing Day and has been involved in the first-team squad on a number of occasions.
McCarthy, captain of the club's Under-21s side, has been rewarded for that progress with a new deal which will keep him at St Mary's until 2017.
"It's great to put pen to paper," he told Southampton's official YouTube channel.
"Obviously at the start of the year I knew I was out of contract at the end of the season.
"I was pleased with my progress at the time and I think I've done well this season so far.
"I've been with the club since I was seven years old, so it really shows that I'm at the right place."
McCarthy becomes the second young defender in as many days to sign new terms at Saints, with Jordan Turnbull, currently on loan at Swindon, signing a deal until 2018 on Thursday.
That news was followed hours later by confirmation of Dani Osvaldo's loan move to Argentinian club Boca Juniors.
The troublesome striker's temporary spell with Inter Milan was cut short in order for him to sign with the Buenos Aires-based giants until June 30, with an option to extend the deal if Boca progress to the latter stages of the 2015 Copa Libertadores.
Source : PA
Source: PA