Ismael lost his first two games in charge, to Darmstadt 98 and Bayer Leverkusen, but oversaw a 1-0 victory over second-division side Heidenheim in the German Cup and watched his team beat promoted Freiburg 3-0 in the league on Saturday.
"Together we analysed the complete situation and came to the conclusion that Valerien Ismael is the right head-coach for VfL Wolfsburg," sports director Klaus Allofs said in a statement.
"An extensive look at all the alternatives proved to us that this is the best solution. This was a decision made of complete conviction.
"We said from the start that Valerian would have a chance and, in our opinion, he has made exceptional use of it -- not just because the team won in Freiburg on Saturday, but rather because he convinced us with his working methods."
Wolfsburg are still 14th in the Bundesliga and host Schalke 04 on Nov. 19, when the league resumes after the international break.
(Reporting by Simon Jennings in Bengaluru; editing by Amlan Chakraborty)
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