Financial terms were not disclosed.
Washington, 61, is entering his eighth season as manager in Texas and has compiled a 611-524 record during his tenure. He has led the Rangers to two American League West titles and two World Series berths.
"This was a foregone conclusion certainly in my mind and in the Rangers' mind going forward that this is the guy that has been our leader through a lot of tremendous times, our field leader, and it's been a partnership from Day 1," Rangers president of baseball operations Jon Daniels said. "I expect that to continue for a long time to come."
Last season, the Rangers finished 91-71, finishing second in the AL West. They lost in the American League Wild Card tiebreaker game to the Tampa Bay Rays.LEMIRE: Spring training preview: American League West