The 56-year-old, who will become the second-longest serving Germany manager behind Sepp Herberger, has been in the job since 2006 and led his team to victory in the 2014 World Cup. They have reached at least the semi-finals in the last five major tournaments, winning 94 of his 141 games in charge.
"The aim is the repeat in Russia in 2018 the success of Rio in 2014," Loew told reporters.
"Beyond that is the European title. That is a special challenge. We did not make it this year. For me it is a big aim," Loew added.
"We have a vision and things we want to achieve in the future and I think this moment was a good one to extend the contract."
Loew's previous contract had run to the 2018 World Cup in Russia and he will now lead the team's Euro 2020 campaign.
DFB boss Reinhard Grindel said the early contract extension would help in preparing for the 2018 World Cup with Germany on track to qualify.
"He is the best coach which we could imagine for our team," Grindel said.
"We have common goals we want to defend our world title in 2018 and we want in 2020, after coming close this year in France, to be European champions."
An assistant to predecessor Juergen Klinsmann from 2004-2006, Loew has only limited Bundesliga experience, having coached VfB Stuttgart before jobs in Austria and Turkey prior to working with the national team.
(Reporting by Karolos Grohmann, editing by Ed Osmond)
