It runs through the 2006 season.
Financial terms were not disclosed.
"When we look at where our football program is, the future is in very good shape," said Athletic Director Laing Kennedy. "I'm very pleased with the improvement shown by our team during Dean's direction and I look forward to even more success in the future."
Pees has guided the Golden Flashes to 14 wins since 2001, matching their total for the previous decade. Kent State was 5-7 this past season and finished fourth in the East Division of the Mid-American Conference at 4-4.
Pees is 17-51 during his stint at Kent State, but 14-21 over the last three seasons.