The 52-year-old will remain with the Italian giants until 2016 under the terms of the new deal, despite his failure to guide them to a top-three spot in Serie A last season
Mazzarri's position at San Siro had been the subject of much speculation after he failed to guide the club to a top-three berth last season.
A fifth-place finish denied Inter a place in the Champions League for a third successive season, but club supremo Erick Thohir believes the former Napoli boss is crucial to Inter's plans.
"We're very happy to have extended our coach's contract," Thohir stated.
"With this extension we have made it clear that Mazzarri is a cornerstone of our project. I'm confident [that] with the hard work and dedication he has shown he’ll achieve great things at this club."
Frank de Boer had been linked with Inter's top job after Thohir publicly stated his admiration for the Ajax coach, but the Indonesian businessman has now put his full faith in Mazzarri.
And the 52-year-old is looking to repay the club with a return to success this season.
"First of all I'd like to thank president Erick Thohir," he said.
"He's shown once again that he believes in me and the project we began a year ago. I hope to be able to repay the faith shown in me with my work on the pitch.
"I'll do everything in my power to get Inter back where the club belongs in Italy and Europe."
Inter have lost captain Javier Zanetti from their ranks ahead of next season after the Argentinian retired from the game, though the experience of Nemanja Vidic, signed on a free transfer from Manchester United, may go some way to easing the burden.
The club have also purchased Sampdoria's share of promising striker Mauro Icardi, having previously had the youngster on a co-ownership basis.