Halai has scored 14 tries in 41 games for Wasps since arriving from Auckland Blues in January 2015.
The 29-year-old has started only seven times this season for the Premiership leaders, scoring two tries.
"Frank still has a big part to play for the club as we enter the business end of the season," director of rugby Dai Young told the club website.
"His game-time has been limited this season due to the form of Christian Wade and the development of Josh Bassett, as well as Willie Le Roux coming on board, so it's a really competitive area."

David McConaghie was accused of recording a woman in the toilets at MP David Simpson's constituency office.
A court viewed footage showing what appeared to be McConaghie placing the device in a bowl of potpourri.
McConaghie, from Cottage Hill, Dollingstown, denied making recordings for his sexual gratification.
The court heard he had made them over a period of several weeks in August and September 2012.
When the camera was discovered, Mr Simpson immediately reported it to police, and McConaghie resigned his position.
McConaghie will be sentenced in five weeks' time.
In a statement, Mr Simpson said he welcomed the decision by the judge.
"This has been an extremely difficult time for my staff, but particularly for the victims," he added.
Mr Simpson paid tribute to the bravery of his staff in giving evidence and withstanding "a harsh, invasive cross-examination".

More than 500 complaints have been made to the Environment Agency about the site in Cormongers Lane, Redhill.
It said it was monitoring gas emissions and would consider formal action against operator Biffa if it was found to be breaching its permit.
Biffa said if did not believe levels of hydrogen sulphide detected posed a threat to human health.
Residents have been complaining about the smell from the site, described as like rotten eggs or sewage, for several weeks.
Green Party councillor Sarah Finch said it reached its worst levels earlier in the week.
"It smells like normal household gas, sometimes with a tinge of sewage smell," she added.
"It is a very unpleasant smell which catches in your throat and can make you gag."
Paul Bennett, from the Environment Agency, said officers were at the site at least once a day to collect data.
The information will be sent to Public Health England to assess whether it poses a risk.
"If Biffa don't keep the gas within the site and we find that they are breaching their environmental permit, then we are going to consider formal action against the company," he said.
Biffa said it had installed a flarestack as a temporary measure, which would burn off the excess gas.
It said a blue or yellow flame may be visible at night.
"This action is being taken with the knowledge of the Environment Agency and is a tried and tested method to increase gas extraction capacity," it said.
"Biffa has undertaken monitoring of the odours and provided the results to the Environment Agency.
"Biffa's interpretation of these results is that the levels of hydrogen sulphide detected do not pose a threat to human health."
Wasps winger Frank Halai will join French Top 14 side Pau at the end of the Premiership season.
[NEXT_CONCEPT]
A former church minister and DUP adviser accused of secretly filming a colleague for sexual gratification has been found guilty of the offence.
[NEXT_CONCEPT]
The operator of a Surrey landfill tip could face legal action over a smell of rotten eggs coming from the site.