The 46-year-old former left-handed batsman took on the role on the eve of the 2013 Ashes and despite losing 3-0 in England, he went on to guide the team to series wins over South Africa, England, India, New Zealand and West Indies.
He also won the 2015 World Cup on home soil with Australia, who currently top the ICC rankings in both Test and one-day international cricket.
Darren Lehmann's contract was due to expire in June 2017.
"I am incredibly grateful for the support and faith the Cricket Australia Board and the players have put in me," Lehmann said in a statement from CA. "I absolutely love doing this job and as far as I am concerned, it is the best job in the world.
"There is still a lot I would like to achieve in the time I have left and we have a lot of hard work ahead of us, especially with an upcoming Test series in India and a home Ashes series.
"I don't just see my job as winning games of cricket. It's about continuing to grow the game from the grassroots up in Australia, and helping to grow the game worldwide."
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