The two-year extension is worth $19.25 million. Hyde also received a $7.5 million signing bonus.
A Pro Bowler in 2017, Hyde is among the leaders on the Bills' defense and forms one of the league's top safety duos alongside Jordan Poyer.
Hyde, 30, was scheduled to become a free agent after the 2021 season. Now he, Poyer and cornerback Tre'Davious White are signed through at least the 2022 season. The trio came to Buffalo during the same offseason, and Hyde said they focused on changing the culture within the organization.
Having reached the AFC Championship Game four years into his tenure, Hyde said he wasn't interesting in leaving what he'd helped build.
"We felt like when we got there in '17, the organization obviously wasn't where we'd want it to be, and I thought the last couple years we were able to turn the thing around," he said. "I would've had a big empty pit in my stomach if I were to have ended up anywhere else, because this team is headed in the right direction."
Drafted by the Green Bay Packers in 2013, Hyde left following the 2016 season after the Packers told him at midseason they would not re-sign him. Hyde said that experience "left a scar" and that he "can't even put into words" what his first contract extension means to him.
"It was a pivotal point in my career to where I really looked myself in the mirror and said, 'We've got to really change this thing and get better,'" he said. "I think with the opportunity I got in Buffalo, it just came hand in hand."
Since joining the Bills in 2017, Hyde is the team's third-leading tackler with 282 combined tackles and ranks third with nine interceptions and 25 passes defended. He finished with 70 tackles and an interception in 2020.
In addition to his contributions on the field, Hyde often tried to play recruiter over the past few seasons to no avail. He said anyone interested in joining the Bills is more than welcome to, but he hasn't forgotten the number of times his offers were turned down in the past.
"I would talk to some free-agent guys that I'm close with, we'd have conversations and they're going on visits," Hyde said. "I'd say, 'Hey, man, come to Buffalo,' and they're like, 'I'm cool, I'm gonna go somewhere else.'
"Well at the end of the day, I bet you they're pretty pissed off they didn't take those visits with Buffalo because they're probably sitting on a trash team or sitting on a couch somewhere else. That's kind of my vent, as you can tell, I'm a little mad at being turned down so many times and guys kind of throwing us under the rug."
Bills GM Brandon Beane foreshadowed an extension during his end-of-season news conference, proclaiming his admiration for Hyde.
"I didn't see any drop-off from Micah this year, so I can't say I think he's declining or anything like that," Beane said. "I'm a big fan of Micah Hyde, just what he brings not only on the field but in our building. You guys feel me. One of the most positive personalities to be around and just a super-competitive guy. You wouldn't feel that when you're just talking to him in an interview. He probably doesn't feel competitive in a one-on-one conversation.
"But when he's on that field, he's one of the most competitive guys, and that's what you love about him. I think he still definitely will play for years in this league if he wants to."
--ESPN's Jeremy Fowler contributed to this report.