The 21-year-old, who scored 11 times and made 52 appearances last season, has signed a two-year deal with the option for a third year.
"Ever since I came through the door four years ago, I have loved being part of this club and I am really looking forward to being part of it again as we try and take Oxford United up to League One and beyond," he told the club's official website.
"The fans have been fantastic with me and I can't wait to get back for pre-season and get playing in front of them again."
Manager Chris Wilder added: "I brought Alfie in as one of my first signings and he has progressed season on season.
"Hopefully he will continue to progress and improve and that will benefit the team and the club over the next two or three years."
- Sports & Recreation