The 46-year-old, whose assistant Eddy Sozer has also committed himself to the Bundesliga side for the same period, was due to be out of contract in the summer.
Stuttgart president Gerd Mauser told the club website: "Bruno Labbadia has done very good work in the two years he has been at Stuttgart."
Mauser added: "He (Labbadia) took over the team at a difficult time, steadily continued to develop it and last season led it into Europe.
"Therefore we are pleased to have tied him to us for longer.Together we still have some plans for Stuttgart."
Labbadia took over at the club in December 2010 following his dismissal by Hamburg earlier in the year.
He led the team to sixth place in his first full season in charge. They lie 11th this term, but just four points off the European places.
Sporting director Fredi Bobic said the coaching team "have not yet reached their goals and will continue to work for the success of the team as intensively as before."
Labbadia said: "We want to give the Stuttgart fans a team that is fun and enthusiastic."
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