The agreement adds three years to Beilein's current contract, which had two seasons to run.
Michigan tied a school record with 31 wins under Beilein last season, losing to Louisville in the final of the NCAA Tournament. The Wolverines have qualified for the tournament in four of the six seasons Beilein, 60, has been their coach.
"John is a tremendous ambassador of the University of Michigan and one of the most highly respected coaches in the country," Michigan Athletic Director Dave Brandon said in a statement Wednesday.
"He recruits outstanding young men to represent the men's basketball program and develops them as players, students and future leaders. John has built a program that will compete for Big Ten championships on a regular basis and make exciting NCAA Tournament runs."
The Wolverines are 122-85 with Beilein as coach. His overall coaching record, which includes stops at Canisius, Richmond and West Virginia, is 673-403.