He has played for the Ireland Under-21 and 'A' teams and won his first senior international cap against Italy in last season's RBS 6 Nations.
Marshall was selected on Ireland's summer tour of North America earlier this year when he played against both the USA and Canada.
Commenting on his new contract, the speedy scrum half said: "When I was growing up, all I wanted to do was to play rugby for Ulster.
"To be able to play in front of friends and family is very special. I am passionate about playing for Ulster and I love what it represents.
"With the squad that we have at the present time and the redevelopment that is going on at the ground, Ravenhill is an exciting place to be."
Ulster's director of rugby David Humphreys added: "Paul is an extremely important member of our squad and I am delighted that he has opted to stay with Ulster for three more years.
"To compete in the knockout stages of both the Heineken Cup and the RaboDirect PRO12, we need depth in all positions throughout the playing squad and retaining another international scrum half is an important part of achieving that."