Terms of the deal were not disclosed. Reid had been headed into the fifth and final year of his contract, signed in 2013.
"My family and I have been very pleased by the success the franchise has sustained over the last four seasons under coach Reid," Chiefs chairman and CEO Clark Hunt said in a statement. "He has already established himself as one of the best coaches in the league, and he is well on his way to solidifying a place among the all-time greats. We are proud to have him leading our football team, and I look forward to working with him to bring a championship to Chiefs Kingdom."
Reid has been one of the most underappreciated coaches in the NFL since taking over the Chiefs.
In four seasons in K.C., Reid guided what was a lackluster offensive roster to a 43-21 record, winning at least nine games each season, with 11-plus victories in three separate seasons and three postseason appearances. Over the past 26 regular season games, the Chiefs own a 22-4 record, the best in the NFL over that time span, including 11 consecutive AFC West games. Reid led K.C. to a 12-4 record in 2016 and the franchise's first division title since 2010.
"I'd like to thank Clark and the entire Hunt family for the opportunity to continue my coaching career here in Kansas City," Reid said in a statement. "We've made quite a bit of progress over the last four seasons, but we are not done yet. We are going to continue to work towards our ultimate goal of winning championships. I've been blessed by the support of the community, our fans, the Hunt family and the entire Chiefs staff. I'm looking forward to the years ahead as the head coach of the Kansas City Chiefs."
An extension for Reid sets up the next phase of the Chiefs' program. Alex Smith is still the quarterback of the present, but Reid drafted his new project in Patrick Mahomes in the first round of the 2017 draft.