No financial terms were disclosed, and both contracts were extended through the 2015-16 season.
Vaughn, 39, was hired in July 2012 after spending two seasons as an assistant with the San Antonio Spurs. He also spent 12 years in the NBA, retiring in 2009.
The Magic went 20-62 in his first season and 23-59 this past campaign, finishing last place in the Southeast Division.
"Rob [Hennigan] and Jacque [Vaughn] have worked extremely hard in establishing a culture which embodies teamwork, hard work, hunger for success and humility," Magic CEO Alex Martins said. "With their strategic direction and leadership, we feel we are headed in the right direction, which will allow us to achieve our goals of contending in a long-term, sustainable fashion."MAHONEY: Short Corner: 12 things you might have missed from the first round of the NBA playoffs