The 52-year-old was appointed at St Mary's in December 2018 and turned around his side's fortunes after a humiliating 9-0 home defeat to Leicester in October last year.
Southampton were 14th, seven points above the relegation zone, when the season was suspended in March because of the coronavirus.
Hasenhuttl said he had no hesitation about signing a deal that keeps him at the club until 2024.
"This, for me, was a simple decision," said the Austrian. "Simple because of the relationship that I have built with the club, the players and the fans, and also because of the relationship they have built with me too.
"I said when I arrived at the club that we were at the beginning of a long journey, and also a journey that would bring emotion and hopefully enjoyment.
"We have already had some moments where we could celebrate together, and some that have been emotional and also challenging."
Saints chief executive Martin Semmens said: "From day one, Ralph has had a positive impact on the club, everyone within it and our fans.
"He joined our club at a time when strong leadership was needed to drive the club forward. This he delivered, but it was the clarity of vision that has ultimately led us to this point."