The 25-year-old joined Burnley from Brentford in February 2016 on a three-and-a-half-year deal and has established himself as a key figure this season following the exit of Michael Keane to Everton.
Tarkowski has been tipped as a future England international following his exploits to help Burnley up towards the European places in the Premier League in 2017-18.
Burnley have now rewarded Tarkowski for his efforts with a long-term contract and Dyche feels the defender is fully deserving of the improved terms.
The Clarets manager told the club's official Twitter account: "We felt it appropriate to offer James a new deal on two levels. He's done well in the Premier League and, secondly, his contract was out of sync. And there's a few more we are talking to."