He saved them from relegation in 2007/08 before guiding them to the play-off final last month, where they lost 3-2 to Scunthorpe.
Jackett said: "I'm pleased to commit myself to the next stage of Millwall's development and to build on the great strides we have made both on and off the field.
"As a group of players, management and staff, we are hungry to prove ourselves in the coming season with consistent quality performances."
Chairman John Berylson added: "The progress we have made in 18 months under Kenny has been tremendous. He has taken us from the brink of relegation to the verge of promotion in that short period of time, and I am convinced the best is yet to come."