Ranieri joins key players Kasper Schmeichel, Wes Morgan and Jamie Vardy in extending his contract.
“The energy that exists here – from the owners and the staff, to the players and supporters – is something very special,” he told the club website.
“Last season, that spirit and our hard work helped us to achieve something magical. If we can continue to work hard, maintain our passion and continue to fight with all our hearts, I am sure we can continue to be successful together.”
Ranieri’s side won last season’s title at odds of 5,000-1, and will be one of the top seeds in the Champions League draw later this month.