Clough, whose father Brian led Derby to the English league title in 1972, has piloted them into fourth place in the table as they seek a return to the Premier League after being relegated in 2008.
"We are all delighted that our futures have been sorted out and that we have the opportunity to continue the work of the last two-and-a-half years of trying to improve this club," Clough told the club's website.
"From day one we knew this was going to be a long-term project and it is still very much a work in progress."
Clough took over at Derby in January 2009 after joining from Burton Albion, and has overseen a change in Derby's fortunes this season after finishing 14th and 19th in the last two seasons.
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