Adams' current deal had been due to expire at the end of this June, but the new option extends this by a further 12 months.
The deal comes just a day after fellow midfielder David Davis had his contract extended.
The 21-year-old has been at Blues since the summer of 2011 after leaving the West Ham Academy.
After coming through the Under-18 and Under-21 ranks at Blues, the Londoner made his First Team debut as a late substitute in Blues' FA Cup third round victory over Bristol Rovers in January 2014.
He later went on to have two impressive loan spells at Lincoln City before returning to St. Andrew's.
This season has seen Adams become a regular in the Blues First Team matchday 18 and he made his second appearance in January when he came on as a late substitute in Blues' impressive 3-0 Championship win against Ipswich Town at St. Andrew's.