The 64-year-old, who has been in charge of the national team since 2000, has penned a contract extension until the end of July 2016.
Olsen was unable to guide the team ranked 25th in the world to next year's showpiece event in Brazil as Denmark finished runners-up to Italy in Group B of UEFA qualifying, winning four of their 10 games.
Olsen said in a statement on the Danish Football Association's (DBU) official website: "There were probably many who are still annoyed that after the first two places in the two previous qualifiers, we only reached second place this time and will not be part of next summer's World Cup finals.
"But now we put the disappointment behind us and use the experience in a constructive way to look forward to the next period."
