Wedge, in his fifth season as the Indians skipper, has guided the team to a 54-37 record this season, one-half game behind the AL Central-leading Detroit Tigers. The team is 373-366 since he took over the Indians in 2003.
Cleveland showed double-digit increases in victories from 2003-05, the first time since Lou Boudreau in 1946-48 that a manager helped the team to that kind of improvement.
"Eric has clearly defined his leadership and vision during his tenure as manager of the Cleveland Indians," said Indians General Manager Mark Shapiro. "Through his relentless work ethic and strong belief in our players, Eric has led our major league team to one of the best records in baseball two of the past three seasons.
"I am confident that Eric is the right man to guide our team as we collectively pursue our ultimate goal of sustainable championship success."