The Italian, 64, led the Foxes to their first top-flight title in
his first season with the club.
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.
The Foxes, beaten
2-1 in the Community Shield by Manchester United on Sunday, begin their
Premier League season with a trip to promoted Hull City on Saturday.
Vice-chairman Aiyawatt Srivaddhanaprabha said: "Twelve months
ago, we brought to Leicester City a man whose knowledge and experience, we
felt, could lead us into the next phase of our long-term plan.
"What he would go on to help us achieve, in the time we have
achieved it, has been beyond anything we could have anticipated."
Leicester captain Morgan, who extended his contract until 2019,
told BBC Radio 5 live that Ranieri's new contract was "fantastic
news".
He added: "He played a big part in our success last season
and all the boys are right behind him."
Former Leicester and England striker Gary Lineker referenced a
tweet he sent when Ranieri was appointed last June.
The Match of the Day presenter tweeted at the time: "Claudio
Ranieri? Really?"
He also said of the appointment: "Claudio Ranieri is clearly
experienced, but this is an uninspired choice by Leicester. It's amazing how
the same old names keep getting a go on the managerial merry-go-round."
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