Jackett, who successfully steered the club away from relegation danger in his first season in charge before reaching Wembley at the play-offs last year, had been linked with several vacant managerial posts around the country so Chairman John Berylson moved quickly to keep his man.
"The progress we have made in 18 months under Kenny has been tremendous," Berylson told the club's official website. "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.
"It was important for us to have Kenny under contract for three more years because there is no doubt in my mind that other clubs will be casting envious glances in our direction before too long."
Jackett was also happy about signing a new deal and is already looking forward to next season. "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," he explained. "This is a club with tremendous potential as was demonstrated by the huge number of fans we took to the Play-off final.
"It is a potential that I, as manager, am eager to develop, and this contract with the backing from the chairman and board of directors, gives me the opportunity to realize this."