The 23-year old number eight/blindside flanker makes it a dozen players who have committed their futures to the region in recent months.
Speaking about his new deal, Allen commented:
"It's very good news for me personally. I couldn't be anywhere better in terms of my development as a player to be honest. The last year or so has been brilliant for me, it really has, I think I've developed as a player and as a person. There's a lot of good boys here, there are some world class players for me to learn from, who have been helping bring through boys like me, always willing to work with us and help us out.
"I'm enjoying my rugby and things have been going really well. With the new contract, I'm looking forward to next season and hopefully kicking on from where I am now. Hopefully I'll get to wear the shirt even more next time around."
Allen arrived in Ospreylia three summers ago, signing from Pontypool RFC after being identified as a player with real potential playing within the national age-grade set-up.
He made his regional debut at the Cardiff City Stadium in an LV= Cup win over the Blues in January 2011, scoring his first ever Ospreys try in the same game. Having found game time limited in his first two seasons with the region, 2012/13 saw him begin to make an impact, featuring regularly and taking his appearance tally to 21, scoring six tries.
A number of eye catching performances in the LV= Cup during the current season, including a man-of-the-match showing against Gloucester at the Liberty Stadium where his late try secured an Ospreys win, led to him being nominated for the LV= Breakthrough Player Award. He also scored two tries in February's PRO12 win over Edinburgh.
Andy Lloyd, Ospreys Rugby Operations Manager, said:
"Morgan is a really good athlete who over the last 12 months has started to fulfil the potential we all knew he had. It hasn't been easy for him and he's had to work hard to get to where he is. I think it's a case of him getting a taste of senior rugby with the Ospreys and the penny dropping as to what it takes to progress at this level and he's never looked back.
"He's extremely powerful, it takes a lot of people to stop him, and he is very capable of scoring tries as his record already indicates. For our game to keep moving on and developing, we need young men like Morgan to keep stepping up, offering something different to the team. He gives us something extra in the back row, his ball carrying and tackling ability will play a huge part in our game moving forward, I've no doubt about that.
"The key for Morgan now is to continue working hard so that he can consistently reach the performance level required to establish himself as a senior player at the region."
Dan Biggar, Richard Fussell, Tom Grabham, Tom Isaacs, Duncan Jones, Rhys Webb, Joe Bearman, Lloyd Peers, James King, Andrew Bishop and Aaron Jarvis have all signed new contracts recently, while the signing of Italian international Tito Tebaldi has also been confirmed for next season.
Guinness PRO12
Suite 208, Alexandra House,
The Sweepstakes
Ballsbridge, Dublin 4, Ireland