"There is only one Dave, and we are extremely proud that he continues to call CBS 'home,'" Leslie Moonves, president and chief executive officer of CBS Corp., said in a statement.
"Les and I had a lengthy discussion, and we both agreed that I needed a little more time to fully run the show into the ground," Letterman joked.
Letterman's is the longest-running late-night talk show host in U.S. television history at 31 years.
His "Late Night with David Letterman" premiered on NBC Feb. 1, 1982. The program earned a Peabody Award, five Emmy Awards and 35 Emmy nominations during its 11 1/2 years on the air.
This year, "Late Show with David Letterman" celebrated a milestone 20 years on CBS. Since its debut on CBS Aug. 30, 1993, the program has been honored with nine Emmy Awards, including six for Outstanding Variety, Music or Comedy Program, and 73 Emmy nominations.
The contract extension means Letterman will stay on the show long enough to witness a changing of the guard at his rival "The Tonight Show" on NBC. Jimmy Fallon will take over the role of emcee from longtime host Jay Leno this winter.
Swim Week Miami Beach 2014 [PHOTOS]