Blanc, who served as France coach between 2010 and 2012, is now tied to the club until June 2018.
The former Manchester United defender has been linked with the Old Trafford job, along with Chelsea and Arsenal.
Blanc described the offer of an extension as a “show of faith” from the club’s wealthy Qatari owners.
“Quite simply, we need to look to the future, that’s the way I see it,” said he.
“Of course, it’s a strong show of faith, and I’m very happy, also for my staff. A coach is nothing without his staff. For us, continuing the adventure is a show of faith but also a big responsibility.
“The club has ambitions both nationally and in Europe, and we’ll do all we can to reach those objectives. We’ll get there; we’re ready. We’re aware that we’re at a big club where expectations are very high.”