No terms were disclosed.
Parcells just completed the third year of his original four-year deal with the Cowboys, which was worth about $17 million.
"I feel very fortunate to have the opportunity to continue what we have started here," Parcells said. "The Cowboys organization has been the fairest of fair to me, and hopefully I can repay them with an improved performance."
Parcells came to Dallas in 2003 and guided the team to its first winning season since 1998. He also has coached both New York franchises as well as the New England Patriots, and has a career record of 174-130-1 -- including an 11-7 record in the playoffs -- over 18 seasons.
He had two Super Bowl titles with the Giants (1986 and '90). He led the Patriots to the title game in 1997.