The Dane has enjoyed a superb first season in charge of the Swans, guiding them to Capital One Cup glory and a place in the top half of the Premier League table.
The former Barcelona midfielder's initial deal was set to run out at the end of next season, but his decision to extend his contract through to June 2015 will alleviate fears he would depart for pastures new this summer.
"We've started something this season that I want to continue," Laudrup told the club's official website.
"I know there has been a lot of speculation (about my future), but I've always said that I am happy here and I never had any doubts I would stay."
- Sports & Recreation