The right-back had previously been frozen out for two years and had not played under boss Paul Lambert until this season.
He was loaned out to Nottingham Forest, Real Mallorca and Bolton and looked to have no future at Villa Park.
Hutton, who has made 39 appearances for Villa, was signed by Alex McLeish for around £3million from Tottenham in 2011 but after Lambert replaced McLeish in 2012, he did not feature.
Lambert admitted last season Hutton was not playing because of his £40,000-a-week wages but he was integrated back into the squad this summer as chairman Randy Lerner wanted to see a return on his investments.
Darren Bent has also followed him back into Lambert’s plans after being farmed out on loan to Fulham last season.
Villa host Arsenal on Saturday after Hutton helped them to a 1-0 win at Liverpool at the weekend, their third win in four league games.
“I kept my head down, worked hard, came in every day and it has paid off,” Hutton told the club’s official website. “Now I just want to go on and take this opportunity given to me by the manager.
“Like everybody else here, I’ve always trained hard so I’ve been able to come back strong this season and the benefits of that have been excellent for me.
“We’ve made a really strong start to the season and we want to continue in the same vein.
“The squad has depth and a great mix of youth and experience, which should stand us in good stead over the rest of the season.”
Boss Lambert added: “You know exactly what you will get from Alan, he’s an excellent professional and he’s made an excellent start to the season for us, helping to drive the defence and adding his experience to the mix.
“The way he’s played, he’s made a big contribution to the great start we’ve made, as have all of the players, because it’s very much a squad game.”