The extension will keep Counsell, who was entering the final year of his contract, with the Brewers through the 2023 season.
"Look, you know this job doesn't have much security. That's what it tells you, right?" Counsell told reporters Wednesday. "I think we've taken steps to put the franchise in a good place, and that's going to be the job moving forward -- to keep it in a good place and to keep us contending for playoff appearances and World Series titles.
"That's our mission going forward, and hopefully with some stability, that helps us do that."
Counsell, 49, was hired to replace former manager Ron Roenicke in May 2015. After two seasons rebuilding, Counsell became the first manager in franchise history to guide the Brewers to consecutive postseason appearances.
Milwaukee posted a 96-67 record in 2018 and won the National League Central title. The Brewers reached Game 7 of the NL Championship Series that season, losing to the Los Angeles Dodgers.
Counsell finished second in NL Manager of the Year voting in each of the past two seasons. He is 405-381 in the regular season with the Brewers since taking over.