Fahrmann has broken into the first team at the Veltins-Arena this season after spending the last three campaigns as understudy to Timo Hildebrand.
However, since November the 25-year-old has been a regular and after 11 clean sheets in 21 appearances he has been rewarded with a long-term contract.
Fahrmann spoke of his delight at agreeing the new deal and is looking forward to further success.
"The dream just gets better and better," he told Schalke's official website. "I'm at home here and I'm really looking forward to the next few years at Schalke."
The goalkeeper's displays this season have helped Schalke climb into third place in the Bundesliga as well as reaching the last 16 of the UEFA Champions League.
His season could yet be capped off with a place in Germany's squad for the FIFA World Cup in Brazil.
