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Flick initially took over from Niko Kovac as an interim manager in November, before Bayern announced the following month that the 55-year-old would stay on through the remainder of the 2019-20 season.
After a successful run since then, Bayern have now confirmed that Flick has agreed a deal to stay on through June 2023.
"The club is very happy with Hansi Flick's work," said Bayern chairman Karl-Heinz Rummenigge. "The team has developed under his leadership and we're playing attractive football, which is reflected in the results."
"I am looking forward to the upcoming tasks together with my coaching staff and the team," Flick added.
"The conversations with Karl-Heinz Rummenigge, Oliver Kahn and Hasan Salihamidzic were very good and characterized by great mutual trust. Together we have defined the direction for the coming years. I am sure that we can achieve a lot together."
Since taking over from Kovac, Flick has led Bayern to 18 wins in his 21 competitive matches in charge. The defending Bundesliga champions are currently atop the table in the now-suspended 2019-20 season, holding a four-point advantage over Borussia Dortmund.
Flick also had Bayern on track for the Champions League quarter-finals, leading his side to a 3-0 win over Chelsea in the last-16 first leg at Stamford Bridge before the competition was suspended due to the coronavirus outbreak.
For Flick, it is his first head coaching role since he departed Hoffenheim in 2005. Since then he served as an assistant for the German national team before joining Kovac's staff as an assistant prior to the 2019-20 season.
Flick also represented Bayern as a player between 1985 and 1990, making 139 appearances and winning four Bundesliga titles.
"It's important for FC Bayern that a coach also understands the club's philosophy," said Bayern CEO Kahn: "Hansi was a player at Bayern, he was an assistant coach; now he's permanently head coach. It's a good progression.
"Hansi knows the mentality of the club, he knows that FC Bayern is measured by maximum success and I'm pleased that we can now develop the club's culture together with him in the coming years."