Terms of the contract, or the length of the extension, were not released.
Niumatalolo guided the Midshipmen to an 8-5 record, best-ever for a first-year coach at Navy during the modern era. The Midshipmen closed the season with their sixth straight bowl appearance, a loss to Wake Forest in the EagleBank Bowl.
Niumatalolo replaced Paul Johnson, who went to Georgia Tech, late last season.
"Rare is the case when a major coaching transition at this level of competition results in the extraordinary success we realized this past season under Kenny's leadership," Navy athletic director Chet Gladchuk said. "His vision for the future of the program and our midshipmen goes well beyond this past season's stellar accomplishments. There is not a better on or off the field leader and role model for our midshipmen than Ken Niumatalolo."
Niumatalolo said, "The Naval Academy has made a significant commitment to me and my family, for which we are eternally grateful. ... [This] is a special place and I have no desire to coach anywhere else in the country."
Niumatalolo's eight wins were the most by a first-year Navy coach since 1926, when Bill Ingram led the Midshipmen to a 9-0-1 record. Niumatalolo also became only the second coach in school history to win the Commander-In-Chief's Trophy in his first year.
Navy defeated both Air Force and Army this season.