The former Manchester United and Everton coach guided Hammers to finish 6th in the Premier League last season.
The 58-year-old Scot secured a place in next season’s Europa League with 65 points, their highest Premier League tally for West Ham.
David Moyes replaced Manuel Pellegrini who was sacked in December 2019 and he went ahead save them from relegation.
“We have made tremendous progress in the past 15 months and that has been a collective effort from everyone at the club,” said Moyes in a statement on the club website.
“We must keep pushing boundaries for consistent improvement as we all aim to continue the growing of the club.
“I am really excited by the ambition that we have at the club and we are going to work as hard as we possibly can to keep moving forward and hopefully give our supporters many a great memory.”
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