The 28-year-old former Wigan and Hull player is in his second season at the Halton Stadium and says extending his stay was an easy decision to make.
"Me and my family are very happy here," he said. "This club is growing and we're building."
Phelps added: "They are the two things that are very evident and you can see them immediately. Last year, we were wooden-spooners and this year we're progressing and, if all goes according to plan, we could finish in a top-eight berth.
"Despite only extending for two more years, I still think that I've got another few years ahead of me after this contract expires."
Widnes coach Denis Betts said: "We are looking at creating some stability within the squad and Cameron is a respected, well-liked and valued part of the group.
"His experience and what he's done in the game so far is only going to help and enhance us."