Karl signed a 6-year contract with Denver when he took over the team in January 2005. Since then, the Nuggets have gone 76-46 and last year won the NBA's Northwest Division title.
"I really want to thank (team owner Stan Kroenke) for making this commitment," said Karl. "This franchise is moving in a great direction and I'm honored to be apart of it. ...
"The Nuggets have great ownership, a committed front office and a collection of coaches and players that I think can be special. I look forward to continuing what we've started."
Karl's 784 career wins over 18 seasons, with Cleveland, Golden State, Seattle, Milwaukee and the Nuggets, leave him tied for 12th-most in NBA history. His teams have won six division titles and have qualified for the postseason 15 times.