Yates' previous deal was due to expire this summer, but the club have moved to secure his future by tying him down to a new two-year deal to keep him at the club until 2020.
The 20-year-old has come through the ranks at Forest and he is highly-regarded within the corridors of power at the City Ground.
Yates has spent the first half of this season on loan at city neighbours Notts County and the all-action midfielder has impressed at Meadow Lane.
Yates has started 29 games in all competitions for Notts County, scoring six goals in the process, and his performances have brought him to the attention of other clubs.
The midfielder is due to spend the season at Meadow Lane, but several clubs are keen to take him on loan elsewhere.
Forest are happy for Yates to stay out on loan again once he signs a new deal so that he can continue his development with regular first-team football.
Yates, who has yet to make his debut for Forest, also enjoyed two successful loan spells away from the club last season at National League team Barrow and League One side Shrewsbury.