The 50 year-old, who first arrived on Wearside in June 2009, has steered his side to seventh in the Premier League table this season as the club aims for a top half finish for the first time in ten years.
Since arriving back in the North East, Northumberland-born Bruce has overseen the purchase of 13 new players on permanent contracts, with 15 moving on to new clubs.
Shrewd loan signings have also bolstered the Black Cats, who lost just twice at home in the top flight in the whole of 2010 under his stewardship.
Speaking of his new contract, Bruce said: "I'm delighted to have signed a new contract. It's a magnificent club from top to bottom, with wonderful support and everything is in place here for a manager. We have the makings of a fantastic young team.
"It's been a great challenge so far and one that my backroom team and I have relished so we're looking forward to continuing with that over the next few years."