UConn President Susan Herbst said the deal -- which includes a total compensation package of $1.2 million for the 2012-13 season -- was made after Ollie "seamlessly" took the reins from the retiring Jim Calhoun in September.
"He demonstrated to all of us that he is a genuine leader of extraordinary talents," Herbst said.
The 40-year-old Ollie joined Calhoun's staff as an assistant coach in 2010, and has guided the Huskies to a 9-2 record this season.
"I am happy to be the head coach at Connecticut for an extended period of time," said Ollie.
Calhoun retired Sept. 13 after racking up a 625-243 record over 26 seasons, claiming seven Big East Tournament titles as well as NCAA national championships in 1999, 2004 and 2011.
His squad was banned from post-season play for the current season after failing to meet academic standards.