Bailey scored 11 goals and added eight assists in 38 games last season. He didn't find the net in his first trip to the playoffs, but he did pick up three assists in six games.
"Josh has become an important member of the young core of the players we have in our dressing room," Islanders general manager Garth Snow said. "We’re excited to come to terms with him on a deal that will ensure he is a member of this team as we solidify ourselves as consistent playoff contenders."
Bailey was drafted ninth overall by the Islanders in the 2008 NHL Draft and has played his entire professional career with the club. Terms of his five-year contract were not released, but the 23-year-old was expected to get a raise on the two-year, $2.1 million deal that expired after last season.