McNamara took charge of United last January, securing a top six place and Scottish Cup semi-final spot in his first season at Tannadice Park.
A number of young players have been drafted into United's side, who currently sit in fourth place in the Scottish Premiership, and McNamara's good work has been recognised by the club's board.
Chairman Stephen Thompson told the club's website: "I am delighted to announce Jackie has extended his stay at Dundee United.
"The Board is excited by the job that Jackie has been doing and his desire to build strong foundations is in line with how we see the Club progressing.
"His commitment to developing young players and giving them the chance to prove themselves on the park is creating positivity for the future and, importantly, entertaining the fans.
"Some of the football this season has been sensational and United supporters have shown hunger for his philosophy by buying half season tickets in record numbers and creating a positive atmosphere at Tannadice on match days."
McNamara welcomed the chance to extend his stay and hopes to maintain the club's steady progress over the coming seasons.
"I am enjoying the job more than ever," he told the official website.
"My relationship with the board of directors and the chairman is the strongest I have experienced in football and working with the quality players available to me at Dundee United makes the job enjoyable.
"The supporters are excellent and I continue to have a great relationship with them. Signing this extension is one of the easiest decisions I have made as manager.
"I am proud to be Dundee United's manager and I see great potential at the club. We have made a lot of progress in the first year here but can achieve a lot more and my desire to take Dundee United to a higher level is my motivation each day."