The Oklahoma State Board of Regents approved Gundy's contract Friday at its annual meeting.
The new contract will begin on Jan. 1 and will provide yearly compensation of $2.2 million.
Gundy's current six-year contract paid him $1,053,000 annually.
"The OSU Board and administration are extremely pleased with the job coach Gundy has done in moving our football program forward," Oklahoma State president Burns Hargis said. "With the caliber of student-athletes he and his staff are recruiting, and with our new facilities, the future is very bright."
Oklahoma State lost only to Texas, Texas Tech and Oklahoma and is ranked 14th in the current BCS standings. Earlier this season, the Cowboys were ranked the top 10 in The Associated Press poll for the first time since 1988 -- when Gundy was the team's starting quarterback.
"I have always appreciated the opportunity to coach at my alma mater," Gundy said. "This is the best job in the country. We have great fans, we are building tremendous facilities, we have great support from the administration, and I have a terrific staff."
Gundy's team became only the eighth team in school history to win nine games.
With their upcoming bowl game, the Cowboys have a chance for the fourth 10-win season in school history.
