Terms of the contract weren't announced, but reports indicated it is for four years.
Brooks took the Thunder to the NBA Finals this season, where they lost to the Miami Heat. They had earlier dispatched the then-defending champion Dallas Mavericks, Los Angeles Lakers and San Antonio Spurs en route to the Western Conference title.
The squad finished first in the Northwest Division with a 47-19 regular-season record in the lockout-shortened 2011-12 season.
"Continuing with Scott as our head coach is extremely significant for the future of our organization," Thunder General Manager Sam Presti said. "As we have continually communicated, he has been integral to our success and we have a deep appreciation for his tireless dedication to our players' development."
Brooks, 46, took the reins from P.J. Carlesimo during the 2008-09 season and has since gone on to compile a record of 174-125 in the regular season and 24-19 in the post-season.
"Oklahoma City is a special place and I'm eager to build upon the foundation and culture of this franchise for years to come," Brooks said.