Iger, who also serves as Disney's chairman, had been slated to step down from the chief executive role after March 31, 2015. Now he will vacate both posts on the same day in 2016.
By extending Iger's chief executive deal, Disney also gives itself more time to choose a successor for him. Among those bandied about as potential replacements for Iger are Disney Chief Financial Officer James Rasulo and Walt Disney Parks and Resorts Chairman Thomas Staggs.
Orin Smith, the independent lead director of Disney's board, said in a statement that it had asked Iger to extend his term as chief executive in part "to provide continuity of Disney’s corporate strategy to create long-term value for shareholders."
"Mr. Iger’s ability to consistently deliver against a strategy of producing high-quality branded content, technological innovation and international expansion has repeatedly resulted in record revenue, net income, and earnings per share for the company," said Smith, who also cited total shareholder return of 193% during Iger's tenure.
Disney reported a massive jump in net income for its fiscal second quarter, lifted by the performance of its TV networks, movie studio and theme parks. The company posted net income of $1.51 billion for the quarter that ended March 30, up 32% from a year earlier. Revenue rose 10% to $10.55 billion.
Iger's pay will not change. The 62-year-old executive's total compensation was $40.2 million last fiscal year. He has been Disney's CEO since 2005.
"I sincerely appreciate this vote of confidence by the Board of Directors, and will continue to work with our talented and dedicated management team to drive creative excellence, innovation and continued growth,” Iger said in a statement.
Among Iger's key projects in the next few years will be the opening of the Shanghai Disney Resort at the end of 2015, which could provide a coda of sorts to his time at Disney.
At the company's annual meeting in March, Iger said he'd spent 15 years on the Shanghai project. "This is personally very special to me," he said.
The massive project is under construction and is slated to include two hotels, 495,000 square feet of retail space, a dining and entertainment venue, a lake and other facilities and amenities.
The extension would also give Iger more time to further integrate Lucasfilm into the Disney fold. The company acquired filmmaker George Lucas' namesake company in 2012 for $4.05 billion and will release a new "Star Wars" movie in 2015.
Shares of Disney closed up 78 cents, or 1.24%, on Monday, to $63.93. The stock is up 28% this year.