Terms of the deal were not disclosed.
Hired as coach of the expansion Predators on Aug. 7, 1997, Trotz has helped Nashville increase its point total in each of its three seasons in the league.
Under the 39-year-old Trotz, the Predators also are the only NHL expansion team of the 1990s to win 28 or more games in each of their first three seasons.
Trotz has managed the feat while giving valuable ice time to one of the NHL's youngest lineups, which currently features 11 players that are 25 or younger.
Trotz has posted a 102-138-28-10 record with Nashville, including a 12-15-5 mark this season.
The Predators did not stop at Trotz on Tuesday as they also signed assistant coaches Paul Gardner and Brent Peterson, assistant general manager Ray Shero and goaltending coach Mitch Korn to contract extensions.