The 41-year-old former Ross County boss took Argyle to May's play-off final in his first season in charge, but they lost to AFC Wimbledon.
The Pilgrims spent much of the last campaign in the automatic promotion places, but finished in fifth place after a drop in form.
Adams' previous deal was scheduled to expire at the end of this season.
"Derek has already made a major contribution to Plymouth Argyle and the board believes he has much more to offer," chairman James Brent said.
"Much of what football clubs do is focused on the ‎current season and yet, to achieve sustainable success, we believe that plans need to be implemented for the medium-term, as well."
Plymouth Argyle manager Derek Adams has signed a new four-year contract with the League Two club.