The versatile 21-year-old enjoyed an excellent 2024-25 campaign with the Scottish Premiership club, winning their Young Player of the Season award, and will now gain further experience there in 2025-26.
Stephenson, who arrived at the Reds from Sunderland at U15 level, is yet to make a competitive debut for the club’s senior side but clocked up four friendly appearances during this summer’s pre-season schedule.
He played 34 times for Dundee United last term, scoring three goals, to help the Tannadice Park club to a fourth-placed finish in Scotland’s top flight and European qualification.
Stephenson’s first exposure to first-team football came when he spent 2023-24 on loan with Barrow.
He signed his first professional deal with Liverpool in 2020 and has now penned fresh terms before returning to Dundee United.