O'Connell and co currently find themselves fourth in the RaboDirect PRO12 after a disappointing derby loss to Ulster last Friday.
But the 32-year-old believes he still has a lot to give to both Munster and Ireland.
"I am feeling really good both mentally and physically, which in part goes down to how well we are looked after here in Ireland," O'Connell said. "So I am looking forward to the remainder of this season and beyond and doing all I can to help make Munster and Ireland be as successful as possible."
Munster coach Tony McGahan added: "I'm of course delighted that Paul has agreed an extension to his contract that sees him remain with Munster for the next two seasons. He's an integral part of the squad whose influence goes way beyond his on-field performances.
"He is a leader both on and off the field, a quality recognised by his recent appointment as Irish captain and the perfect role model for those who aspire to play professional rugby."
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