Valverde, who took over at the Camp Nou in 2017 after joining from Athletic Bilbao, won the league and cup double last season, AFP reported.
"FC Barcelona and Ernesto Valverde, the first team coach, have reached an agreement to extend the contract between the two parties for another season (2019/20) with the option for one more (2020/21)," the club said in a statement.
Valverde's previous contract would have expired at the end of this season.
He came within a whisker of leading Barca to an undefeated 2017/2018 season when only a defeat late in the season at Levante prevented the team from making history.
Barca's run of scoring in 37 consecutive matches in the league came to an end last Sunday with a goalless draw away to Athletic Bilbao.