The German took charge of the club in 2017 and won promotion to the Premier League in his second season at the helm.
After relegation in 2020, he has taken the Canaries back to the top-flight at the first time of asking.
"I'm absolutely over the moon and feel pretty emotional in such a moment," he said in a club statement announcing the new deal.
"I'm unbelievably grateful for all of the trust and support. It is a pleasure to be allowed to continue to work on this level with such a special club.
"I must also thank (sporting director) Stuart Webber for his trust and backing, my staff and players, as well as the supporters. We have a pretty special relationship in this club.
"Now it's about going the next step, doing everything we can to make sure this club becomes an established Premier League side."