MacLean, who won the Jack Adams Award in his second season as head coach in Ottawa, took over the team in October 2011 and has guided them to two consecutive playoff appearances.
The Senators lost in the first round in his first season but upset the second-seeded Montreal Canadiens in the first round of the playoffs this year.
"In two years, Paul has made a significant impact on the entire franchise, both on and off the ice," General Manager Bryan Murray said. "We feel that under Paul's direction we have been able to develop into a team that is competitive each and every night and we are confident that he is the person we want behind the bench to lead us to our goal of being a championship level team."
Senators owner Eugene Melnyk said MacLean "represents what we want to become as both a hockey club and as a franchise."
"He is a hard-working coach and an outstanding teacher and mentor of the game," Melnyk said. "Paul's ability to communicate openly and honestly with our players and prospects has been key to our on-ice success. He came to us with a history of winning and has instilled that same winning mindset with our players and our coaching staff."