The athletic director said Jones exemplifies "loyalty to the University of Cincinnati" and will lead the Bearcats to "great things" in future seasons.
"I have tremendous faith in Coach Jones and his ability to lead our young men on the football field, in the classroom and in the community," Babcock said.
Jones has been at Cincinnati's helm since Brian Kelly left the school in 2010 to become the head coach at Notre Dame after the former mentor had guided the Bearcats to back-to-back Big East titles and BCS Bowl appearances in 2008 and 2009.
"This a commitment to our staff and to the football program as a whole," he said.
Jones led Cincinnati to 10 wins in the recently completed season, claiming a share of the Big East title and downing Vanderbilt in the Liberty Bowl.