The former England dual-code international has won a Six Nations Grand Slam and a Triple Crown since succeeding Joe Schmidt in 2019, as well as overseeing a Test series victory in New Zealand.
Farrell also took the side to the top of the world rankings, although the recent World Cup in France ended with Ireland again failing to make the last four of the showpiece event following an agonising quarter-final loss to the All Blacks.
"Coaching Ireland has been a hugely enjoyable experience and I'm proud to extend my association with the Irish Rugby Football Union (IRFU)," Farrell, 48, said in an IRFU statement.
"It's a pleasure to work with such a talented and committed group of players and as we enter a new cycle, it will be exciting to see more players come through the system."
Farrell, the father of England fly-half Owen, added: "There is a talented group of established internationals who are determined to succeed at international level for Ireland and I'm excited to see how the recent Ireland Under-20 squads will also emerge and challenge for international honours in the near future.
"It all makes for an exciting next chapter and it is one which my family and I are delighted to continue."
IRFU performance director David Nucifora said he was delighted to have retained the current World Rugby coach of the year
"Over the course of the last four years Andy has helped drive the highest standards for the men's national team," Nucifora said.
"It's testament to the positive environment which he and his backroom team have fostered that Ireland has enjoyed such a sustained period of success in recent times."
By the time Farrell's extended contract ends, he will have spent 11 years in Dublin.
The finishing date of his new deal also leaves open the possibility of Farrell succeeding England head coach Steve Borthwick, whose contract with the Rugby Football Union also ends after the 2027 World Cup in Australia.
