Pochettino's new contract will keep him at the Parc de Princes until 2023.
The Argentine manager's previous deal after replacing Thomas Tuchel in January was expected to expire in 2022.
"I'm really very happy, for myself and also for my staff," said Pochettino.
"It's very important for us to feel the confidence of the club and we will give our maximum so that the supporters are proud of Paris St-Germain.
"That's why we will try and reach our objectives all together, as one. Twenty years ago I was captain of this club and today I am the coach. It's a dream come true."
Pochettino in last season lost the Ligue 1 title to Lille and also guided PSG to the Champions League semi-final where they were beaten by Pep Guardiola's Manchester City.
But club president Nasser Al-Khelaifil is optimistic the former Espanyol trainer is capable of winning glories for the club.
"We are delighted that Mauricio has reaffirmed his commitment to the Paris St-Germain family," he said.
"Having also captained the team 20 years ago, he understands the club values, ambition and vision for the future. With Mauricio's leadership, we're excited and confident about what the future holds."
Pochettino who was replaced by Jose Mourinho at Tottenham Hotspur in November 2019 was linked with a return to the London-based club before the announcement of Nuno Espirito Santo as the new gaffer for The Lilywhites.
The goal for a Champions League success still lives on at PSG after making marquee signings of Achraf Hakimi, Giorgino Wijnaldum and experienced Sergio Ramos.
Pochettino in his playing days was the captain of PSG from 2001 until 2003.
