Hamren's side were eliminated from the World Cup as they slipped to a 4-2 aggregate defeat against a Cristiano Ronaldo-inspired Portugal in their play-off showdown last month.
There had been speculation that the 56-year-old - who took charge in September 2010 - would leave his post as a result of their exit from the tournament, although the Swedish Football Association (SvFF) had mooted the possibility of extending his deal.
And the governing body have shown faith in Hamren, with the two parties agreeing to an extension that will see him retain his position until 2016.
"I'm really charged up and eager to make it to the UEFA (European) Championship in 2016 in France. It will be really exciting," Hamren said.
Sweden have not gone past the group stage of a major competition since reaching the last 16 of the 2006 World Cup.
But the SvFF are confident that Hamren is the right man to guide them to qualification for the European Championships.
"We are pleased with the job Erik has done and are convinced that he is the best man to lead us towards our next goal," SvFF chairman Karl-Erik Nilsson said in a statement.
