Wood played across all three formats when he first joined Lancashire, but he has not played any Championship cricket in the past two summers as he has switched his focus to the white-ball game.
He has played in T20 leagues in Pakistan and Bangladesh, while he will join up with Adelaide Strikers next month for the new season of Australia’s Big Bash.
The left-armer has helped Lancashire reach three T20 Finals Days during his time at Emirates Old Trafford and lifting the trophy is a burning ambition.
“Playing for England is a huge honour, but Lancashire feels like home for me now, and to have clarity over the next few years is brilliant,” he told the club’s website.
“Having reached three Finals Days during my time at the club, it feels like we are really close to success in the Vitality Blast, and it would be really special to achieve that with this group.”