Kelly led the Ducks to a 10-3 overall record, the Pac-10 championship and a Rose Bowl berth in his first season as head coach a year ago. He is the only Pac-10 coach to win the conference title in his first year.
He earned $1.8 million last year under terms of the original contract.
Kelly took over the Ducks from Mike Bellotti, who coached the Ducks for 14 seasons before becoming the school’s athletic director. Bellotti resigned from that post earlier this year to become a college television analyst for ESPN.
“Chip Kelly’s track record in a short amount of time speaks volumes for his character, integrity and ability to lead this program to a new set of standards,” new athletics director Rob Mullens said in a statement. “It became clear before my arrival at Oregon that retaining him to head the university’s football program was a priority. This is an investment in the future success of Oregon athletics and an investment in retaining one of the brightest college coaches in the country.”
The fourth-ranked Ducks are 4-0 this season heading into a key game against No. 9 Stanford on Saturday.
Should Kelly leave Oregon after this season, he would have to pay a $4 million buyout, but the buyout decreases over the term of the contract.