The Republic of Ireland international penned a three-and-a-half-year deal with Saints.
Obafemi has enjoyed some first-team playing time under manager Ralph Hasenhuttl and has impressed since signing with the Saints academy in 2016.
After signing from Leyton Orient, Obafemi has been a prolific goalscorer for Southampton at U23 and U18 level.
“It’s a good day. I’m happy that it’s done and now I’m looking to move forward,” Obafemi said per the club website.
“I’ll always be thankful to the club for sticking by me, and I just want to show everyone what I’ve got.
“I’m determined to show the fans and everyone at the club why I’ve been given a three-and-a-half-year deal.”
Hasenhuttl was glowing in his praise of the young forward.
“Young players like Michael represent a big part of the future of Southampton, so this is an important day for him and also for the club,” Hasenhuttl said.
“Already, he has shown to me he can have a big impact in our games and, with the right guidance and also with the right approach from him, I think this influence will increase.
“This is a big day for Michael, but I think what is most important now is that he realises this is the start for him, and that he must use this as a base to make the next steps in his development.
“There is still a great amount of potential for Michael to fulfil and a lot for him to achieve, and this is the best place for him to do it, so he must focus on working as hard and professionally as possible to make sure he becomes the player I believe he can be.”