It is the most significant signing of the season so far for Ryan, who told www.gloucesterrugby.co.uk "When any club starts drawing up a shopping list for the sort of indivduals they want and a player of James's quality is out of contract, he will be top of that list.
"He is an outstanding talent, a player with an ability to become world class, and we are naturally delighted he has pledged his future to us.
"Ensuring James remained a Gloucester player has been a priority for us but these things take time. There was never a chance we would let him go - his record speaks for itself and we want him to be part of Gloucester's future."
Simpson-Daniel (23), joined Gloucester from Sedbergh School in 2000 and marked his home Premiership debut against Rotherham a year later with a try.
Equally at home as a predator on the wing or causing havoc in the centre, Simpson-Daniel has a remarkable try-scoring record. In 77 appearances in all competitions, he has scored 43 times - including 12 tries in 13 appearances this season.
Identified early as a talent for the future, Simpson-Daniel marked his non-capped England debut with a sensational try against the Barbarians when he out-witted and then out-paced a combination of Percy Montgomery, Christian Cullen and Jonah Lomu to stun Twickenham.
But a combination of illness and injury has curtailed his international ambitions. However he will look to add to his eight red rose caps in the forthcoming Six Nations Championship.
Naturally delighted to have secured his future at Gloucester, Simpson-Daniel said: "I am thrilled everything has been sorted out because I simply couldn't envisage playing my rugby anywhere else.
"When this contract expires I will have been at the club for nine years and I want to be part of a team that is challenging for honours and winning things.
"I think this sort of contract shows a great deal of confidence in me because three years is a long time and now I have to knuckle down, work really hard at my game and try and improve.
"What Dean Ryan has said about me is really kind but the coaching staff have set the standards for all of us to follow. There is a great deal of respect in the environment we work in and now I want to try and repay that faith over the next few years.
"I am just delighted it has all been completed and hopefully now we can end the season strongly in the Challenge Cup and Guinness Premiership. My aim is also to try and realise my international ambitions and at Gloucester I am in a perfect place to make that happen."