Argentine Marcelo Bielsa took over as Chile coach in 2007, with the team in a shambolic state. Then he led Chile to their first win at a World Cup for 48 years.
"Marcelo Bielsa will keep working with us until 2015," said Harold Mayne Nicholls, Chilean Football Federation President.
"We have reached a full agreement which has been ratified by the directors. He is very satisfied by this agreement and so are we. We have fully agreed with all the demands he has made to continue this job," he added.
In FIFA World Cup 2010, Chile beat Honduras and Switzerland, their first wins at the finals since 1962, to reach the last 16, before losing 3-0 to Brazil.
Bielsa's new contract will include 2011 Copa America in Argentina, the qualifiers for the 2014 World Cup in Brazil and the 2015 Copa America.