The agreement was announced late Thursday and ties Hoiberg, who was an all-Big Eight selection when he played for the Cyclones, to Iowa State through the 2022-23 season. He had reportedly been considered for the coaching vacancy at Minnesota.
"When I returned to the university three seasons ago, it was a dream come true. The progress that we have made so far has been very rewarding, but there is more work ahead," Hoiberg said in a statement.
"I sincerely appreciate the support that President [Steven] Leath and [Athletics Director] Jamie [Pollard] have given me. Ames is my home and Hilton Coliseum has given me countless memories as both a player and coach. I look forward to continue leading a program that Cyclone fans can be proud of."
The Cyclones were 23-12 this season and advanced to the third round of the NCAA Tournament. In three seasons under Hoiberg, Iowa State is 62-39 with two NCAA Tournament appearances.
Hoiberg, 40, was voted Mr. Basketball in Iowa as an Ames High School player in 1991 and stayed in his hometown to play for Iowa State. While in college he received several write-in votes in a mayoral race, earning Hoiberg the nickname "The Mayor."
He played 10 seasons in the NBA before turning to coaching. He was named the Iowa State coach on April 27, 2010.