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The Portuguese, 42, had been linked with jobs in the English Premier League after inspiring Monaco to their first French title since 2000 and the Champions League semi-finals.
"I'm very happy to continue my work with Monaco," Jardim said, adding that the "future looks very bright".
"The last three seasons have been exceptional, crowned by becoming French champions in May."
Monaco vice-president Vadim Vasilyev added: "He is one of the best coaches in European football and despite solicitations has chosen to continue his adventure at Monaco.
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"We had a common desire to continue to develop the club's plans and it's therefore a great pride to announce the extension of his contract until 2020."
The concern at Monaco after they wrapped up the Ligue 1 title ahead of Paris Saint-Germain was an exodus of key players.
Although Bernado Silva has already joined Manchester City, Colombian striker and club captain Radamel Falcao has extended his contract until 2020.
Hopes will now be raised that 18-year-old Kylian Mbappe, dubbed the new Thierry Henry, will rebuff interest from Real Madrid and Manchester United to stay under Jardim, who arrived in Monaco in 2014 from Sporting Lisbon, having previously coached Olympiakos in Greece and Braga.
Premier League clubs are also keen on Tiemoue Bakayoko, a revelation last season after a difficult first two years at the club.