The former Manchester United defender, who joined the northeast club in June 2009, has guided the team to seventh place in the table with a third of the season remaining.
Sunderland hasn't finished in the top half in England's first division for 10 years.
Sunderland chairman Niall Quinn says Bruce "has reshaped our squad beyond recognition" in his 18 months at the club.
The 50-year-old Bruce says Sunderland "has the makings of a fantastic young team."
Short link: