Bylsma, who had one year remaining on his current agreement, has led Pittsburgh to the NHL playoffs each of his five seasons as coach. The Penguins finished 2012-13 with an Eastern Conference-best 72 points but were swept in the conference final playoffs by Boston.
Assistant coaches Tony Granato and Todd Reirden also had their contracts extended but Giles Meloche is stepping down as goaltending coach and taking a position as special assignment scout.
"I believe in Dan Bylsma and I believe in stability with our coaching staff," Penguins General Manager Ray Shero said. "Dan is one of the top coaches in the NHL. His record speaks for itself. We fell short of our goal this year, and we're all disappointed in that, but I believe -- and our ownership believes -- that Dan is the man to lead us into the future."
Bylsma, 42, has the best winning percentage (.699) for a coach in the Pittsburgh franchise history with a combined record of 201-93-25. He was voted the Jack Adams Award as the NHL's Most Outstanding Coach in 2011.