The 69-year-old, who joined the Bluebirds in October 2016, has guided his side to second place in the Sky Bet Championship, four points clear of third-placed Aston Villa.
‘After positive talks, I am very pleased that Neil has committed to Cardiff City Football Club for a further two seasons,’ owner Vincent Tan told cardiffcity.co.uk.
‘Having supported Neil since his arrival at the club we have been delighted to see results follow on the pitch.
‘We are very happy to have agreed this deal, and are looking forward to continuing to bring further success to Cardiff City.
‘We were also pleased to strengthen the team in the recent January window, and wish Neil and the entire squad much success in the games ahead.’
Assistant manager Kevin Blackwell and first-team coach Ronnie Jepson have also extended their stay.
Pivotal game in Group E almost a pick ‘em with the bookies