Hesson's contract was due to expire in April next year but NZC said he will be staying on until the end of the next World Cup, to be staged in England and Wales from May-July 2019.
"Mike's the most successful coach in New Zealand cricket history and, in my opinion, the best selector we've ever had," NZC chief executive David White said.
"To have him committed to the Black Caps until after the next World Cup is great news for all concerned."
However, he has revived their fortunes, particularly in limited-overs cricket, guiding them to the final of last year's World Cup and overseeing a giant-killing run to the semi-finals of this year's World T20 tournament.
New Zealand are currently ranked number one in T20s, two in one-dayers and fifth in Test cricket.
Hesson said he still found the job rewarding and was looking forward to a new era working with McCullum's replacement Kane Williamson.
"It's a privilege to be a part of the Black Caps culture and I feel lucky to be able to contribute to that for a little bit longer," he said.
NZC said it had also retained the services of batting coach Craig McMillan, manager Mike Sandle and strength and conditioning coach Chris Donaldson.