Micheal Maguire joined the Rabbitohs in 2012 and led them to the premiership two years later, with victory in the World Club Challenge following in 2015.
However, the former Wigan Warriors coach came under intense pressure last term as Souths went on a nine-game losing streak from June to August, form which cost them a place in the Finals.
The Rabbitohs ended the season with four straight wins and have opted to retain the services of the decorated Maguire.
“I’ve loved every minute of coaching this side and being part of this club. I believe in this playing group and I believe in this organisation,” said Maguire in a statement.
“Everyone at this club knows what it takes to be successful, everyone knows the hard work that’s in front of them and everyone is hungry to achieve success, and that’s something we’ve built up over the past five years.
“We all want to return to the top end of the ladder and we’re dedicated to achieving that this season and into the future.
“I have a committed group of players, coaches and support staff that are prepared to work harder than ever before to achieve the results we want to achieve.
“My family and I couldn’t be happier to know that we are staying here at this club which has become our home.”