The new agreement extends until 2028, the Premier League club announced.
"From the moment I arrived here 20 years ago, I have felt the magic of Manchester United," Carrick said on the club's website.
Carrying the responsibility of leading this special football club fills me with immense pride.
Carrick took over after Ruben Amorim was sacked in January and has overseen United's recent surge.
Under his leadership, the once-struggling club has won 11 of 16 matches and secured Champions League qualification for next season.
As a player, 44-year-old Carrick won five Premier League titles with United, among other honours.
