The 57-year-old was appointed Milan manager in October 2019, replacing Marco Giampaolo after a difficult start to the season.
Pioli guided Milan back into the Champions League after a seven-year absence by finishing second in his first full season in charge.
The former Inter Milan and Lazio boss went a step further last term when he guided AC Milan to their first Serie A title in eleven years.
Milan said in a club statement on Monday: “AC Milan is happy to announce Stefano Pioli has extended his contract until 30 June 2025.
“Having begun this virtuous path, which led to the 2021-22 Serie A title, AC Milan and Stefano shall continue to work on this ambitious project which reflects the Club’s history and values.”
Pioli's previous contract would have expired at the end of this season.
AC Milan are third on the Serie A standings, six points behind leaders Napoli and will advance to the knockout stages of the Champions League if they avoid defeat against RB Salzburg on Wednesday.
