The Falcons are 33-15 under Smith, the best three-year record for the franchise. Atlanta was 13-3 last year and had the best record in the NFC but was beaten 48-21in the divisional round of the NFL playoffs.
The Falcons, who have been in the NFL since 1966, hadn't had back-to-back winning seasons until Smith took over the team.
"I am looking forward to continuing to build upon the solid foundation we have in place within our organization and on our football team," said Smith in a statement. "We are going to continue to work as hard as we can to bring a championship to Falcons fans and to the city of Atlanta."
Smith signed a four-year deal with the Falcons in 2008 thought to be valued at $8 million-$10 million. The new deal keeps him under contract with Atlanta through the 2014 season. Other terms of the agreement weren't released.