The deal was announced on Tottenham's website on Friday evening, and comes following a whirlwind spell in which the 22-year-old has found himself thrust into the spotlight, both on and off the field.
Townsend made such an impression in his first eight Barclays Premier League games this season that he was called up by England for their final two vital World Cup qualifiers.
He scored a fine goal on his full England debut against Montenegro last Friday before winning a second cap against Poland on Tuesday as the Three Lions qualified for the World Cup finals in Brazil next year.
While his on-field contribution has seen him take centre stage, Townsend has also found himself caught up in the row over Roy Hodgson's half-time joke during the match against Poland.
Hodgson made a quip about a monkey in space to illustrate why his players should give the ball to Townsend but offered an apology to anyone offended on Thursday after claims it was racist.
Townsend, whose father Troy is the mentoring manager for anti-racism group Kick It Out, took to Twitter to say: "I don't know what all this fuss is about. No offence was meant and none was taken! It's not even news worthy!"
It did, though, overshadow England's qualification and continues to rumble on giving Townsend an early indication of what it is like to be in the spotlight.
Villas-Boas believes he will be able to handle the pressure of being talked of as England's brightest young star with his every move scrutinised between now and the World Cup.
Jack Wilshere was afforded that tag after he burst on to the scene with Arsenal, while players like David Bentley have failed to live up to potential under the weight of expectation.
"That is part of growing up as a player," Tottenham manager Villas-Boas said.
"I would suppose that wouldn't divert his attention too much.
"I expect him to be the same player. There are going to be more people worried about him, he will be more in the public eye and they will demand performances from him and I expect him to respond.
"Most of his colleagues are down to earth, he is in the right environment for his development and I think we have to help him in that sense."
Townsend had nine loan spells before he got his first crack at regular first-team football with Spurs this season.
And the main reason Townsend has had an extended run in the first team is because of an injury to Aaron Lennon, who is now fit and in contention for Sunday's game at Aston Villa.
Villas-Boas was concerned that Townsend's experience with the international team would be counter-productive.
The Portuguese feared the winger would go down the same route as Jake Livermore and Tom Huddlestone, who received call-ups and were then quickly discarded.
Theo Walcott and Alex Oxlade-Chamberlain will come back into the reckoning by the time the World Cup comes around, but Villas-Boas is sure Townsend will feature for England for a long time to come as long as he keeps impressing for his club.
The Portuguese manager added: ''We're very proud of what he has done, (we have) seen him play with so much confidence and determination he's really set his place in the team, for Tottenham and for his country.
"It's performances like this that keep your place in the team.
"Whenever he's been called up by myself or Roy he's given great performances. At the moment we're very happy with what he's been doing and I think Roy thinks the same.
"It's wonderful for him. He's come along with the explosion he had in the Premier League, not just with Tottenham but with his country.
"He is doing extremely well for club and country and deserves credit."
It has, though, been an emotional experience for Townsend's family, with father Troy telling Sky Sports News: "The goal on Friday night gave us an amazing feeling and I thought he was absolutely fantastic in the hotbed of Tuesday.
"It's hard to put into words how we felt at the time and we're immensely proud of him.
"The nation were quite rightly proud of their side, two important games, we reached our goal of the World Cup but unfortunately there was no time to enjoy that feeling...before the very next day we are talking about something a little bit different.
"There's disappointment. It's a nightmare.
"It's been difficult for us at Kick It Out. I'm not sure people fully understand our role. We have an obligation to report incidents that happen and we've done that regardless of whether it's international or grass-roots level.
"It's particularly difficult for me having involvement on both sides. We should be concentrating on the glories of both games."