Gardenhire, 46, led the Twins to a 96-66 record and the American League Central Division title. The Twins have won the division in four of the five seasons Gardenhire has been their manager.
"Ron and his staff have done a tremendous job, not only in 2006, but over the last several years," said Twins General Manager Terry Ryan. "Their leadership, knowledge and work ethic have helped our players excel in this organization."
Gardenhire has a 455-354 record since taking over as Minnesota's manager.
Minnesota also signed pitching coach Rick Anderson, bench coach Steve Liddle, bullpen coach Rick Stelmaszek, third base coach Scott Ullger, hitting coach Joe Vavra and first base coach Jerry White to contracts through the 2008 season.