The deal comes just four days after Juve lost 4-1 to Real Madrid in the Champions League final in Cardiff, prompting speculation the manager might leave the Turin-based side.
Allegri, greeted with scepticism and hostility by the fans when he arrived at Juve three years ago, has won three league and cup doubles in as many seasons and has also led them to two Champions League finals, although they lost both.
"Today's agreement extends a working relationship that has seen (Juventus) consolidate their position as Italy's top team and also evolve into one of European football's major forces," the club said in a statement on Wednesday.
"Since being appointed manager in the summer of 2014, the Bianconeri have won three Serie A titles, three Coppa Italia trophies and one Italian Super Cup," Juve added.
Under Allegri, Juventus have won 84 of 114 Serie A matches, scoring 269 goals and conceding 71, the club added.
Juventus have won Serie A six times in a row, the previous three under current Chelsea manager Antonio Conte.
Allegri, a former midfielder who had a journeyman playing career, also won Serie A with AC Milan in 2011, although he was fired by the club in January 2014.
He previously coached at Serie A side Cagliari, having started his career with fourth tier Aglianese in 2003.
(Reporting by Silvia Aloisi; additional reporting by Brian Homewood in Berne; Editing by Ken Ferris)
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