The deployment of a 120-strong Provincial Reconstruction Team had been due to expire this September, the New Zealand Herald reported.
But Clark, saying it was in everyone's interests that Afghanistan had a stable government, said the PRT provided a valuable contribution to this aim.
New Zealand has taken part in military operations in Afghanistan since December 2001, and the reconstruction team has been deployed since September 2003.
New Zealand has spent $79.4 million on peacekeeping and development in Afghanistan.
Tuesday's decisions would involve further defense spending of $16.5 million for the PRT and $2.39 million to cover Afghan army training and other deployment costs.
Defense Minister Phil Goff said around 35,000 army personnel and 55,000 police have been trained to a basic level and 60,000 combatants have been disarmed.
"Much also remains to be done before Afghanistan could be considered able to maintain its own future security," Goff said.
"Violence from Taliban and al-Qaida insurgents increased in 2005, and warlord-ism and a growing trade in opium continues to destabilize Afghanistan and present major problems," Goff said.