Gisdol was appointed as successor to Marco Kurz two years ago and kept the club up with a play-off victory against Kaiserslautern, then guided them to a ninth-placed finish in his first full season at the helm.
Hoffenheim have made further strides this season and are in contention for a place in Europe, as they sit seventh in the table with six games remaining.
Gisdol was on Thursday rewarded with a two-year extension, with his previous deal due to expire at the end of next season.
The 45-year-old said: "I feel very comfortable here, have a fantastic team of coaches and a great manager."
Hoffenheim will attempt to round off a great week for Gisdol by beating runaway Bundesliga leaders Bayern Munich at the Rhein-Neckar Arena on Saturday.
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