Published Wednesday, 04 January 2012
O'Connell, who has 82 Irish caps, will continue to represent his home province of Munster until 2014.
He was recently named Ireland captain for the 2012 RBS 6 Nations, for whom he made a try scoring international debut against Wales in Dublin in 2002.
Whilst playing for Munster, he has won two Heineken Cups, one as captain, as well as two Magners league titles and a Celtic Cup.
He has also represented the British & Irish Lions on two tours, to New Zealand in 2005 and as Captain to South Africa in 2009.
O'Connell said: "So much has changed since my first games for Munster and Ireland, with Heineken cup and Grand Slam wins, brand new stadiums and having the opportunity to play with so many good players, that it was always a very easy decision to remain in my home province."
Speaking about the future, he said: "I am feeling really good both mentally and physically, which in part goes down to how well we are looked after here in Ireland.
"I am looking forward to the remainder of this season and beyond and doing all I can to help make Munster and Ireland as successful as possible."
Ireland Coach Declan Kidney said: "It is a very strong message when you have a player of Paul's standing opting to continue playing in Ireland with Munster.
"Paul has been a very important player and leader for both Ireland and Munster during his career and I am especially pleased that he has come back so strongly after his injury troubles."
O'Connell's senior international career has seen him selected for three Rugby World Cup squads in 2003, 2007 and 2011 and was part of the sides that won five triple crowns, one RBS Six Nations Championship and Ireland's second ever Grand Slam in 2009.
IRFU Chief Executive Philip Browne said: "The retention and development of Irish players is one of the top priorities for Irish Rugby to ensure continually competitive teams at provincial and international level.
"Paul O'Connell is a prime example of this and I am delighted that he has further committed himself to Munster Rugby and the IRFU. He has done so much to contribute to the success of the Munster and Ireland teams during his career and is a shining example for younger players."
Munster Coach Tony McGahan said: "I'm of course delighted that Paul has agreed an extension to his contract that sees him remain with Munster for the next two seasons.
"He's an integral part of the squad whose influence goes way beyond his on-field performances. He is a leader both on and off the field, a quality recognised by his recent appointment as Irish captain and the perfect role model for those who aspire to play professional rugby."