With Schalke battling for a Champions League qualifying spot after a poor first half to the season, Keller, whose contract expires at the end of the season, was credited with turning their fortunes around after taking over in December.
"Jens took over at a very difficult moment in December," sports director Horst Heldt said in a statement. "Against all odds he worked steadily and followed his own line to bring the team back on course.
"We are convinced by his work in the past months despite injury setbacks."
The 42-year-old Keller, who had only a brief stint as VfB Stuttgart head coach in the 2010/11 season, took over from Huub Stevens at Schalke in December.
They lost 2-1 to Stuttgart on Saturday to stay fourth, a point ahead of Freiburg, whom they play in the season finale next week.
The winner of that match will secure fourth spot, which leads to the qualifying rounds of Europe's premier club competition.
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