Payne joined the Bulldogs before the start of the 2010 season after stints with St George Illawarra and the Wests Tigers.
The 26-year-old only made his Bulldogs debut in the final round of last year after an injury in the pre-season and has made six appearances so far in 2011 to take his career tally to 95 first grade matches.
A Chester Hill junior, Payne said he was delighted to commit his future to his boyhood club.
“I am extremely pleased to be able to continue my career at the Bulldogs for a further two seasons,” Payne said.
“I am a local junior, I have supported the club my whole life. I am very proud to say I am a Bulldog.”