The Australian has been a huge success since taking up the role following the Red Rose's disastrous 2015 World Cup campaign, guiding the northern hemisphere powerhouse to 22 wins in 23 Test matches.
The 57-year-old's original deal was due to expire after the 2019 World Cup and Jones had suggested he might be ready for a new challenge after the tournament in Japan, indicating he would like a crack at coaching the British & Irish Lions.
However, Jones has opted to sign on for an extra two years, with his new deal containing a break clause based on how England perform at next year's World Cup.
Jones is looking forward to continuing his work building a legacy for England.
"Coaching England is a dream job for me and I was delighted to be asked to stay on after the World Cup," he said.
"I have been completely focused on developing a team capable of being the number one rugby team in the world and winning the World Cup in 2019.
"I never take my role as England head coach for granted and did not presume I would be asked to stay on but, once the conversations started very recently, it was not a difficult decision to make."
The RFU have also outlined their plan to find Jones' successor, revealing they plan to appoint the new coach by the end of the 2019/20 season. The chosen individual will then work under Jones before replacing him in 2021.