The former AEL Limassol and Hapoel Tel Aviv coach has been in charge of the national team since 2011, but failed to guide them to their first FIFA World Cup since 1970.
Guttman's side finished third in Group F of European qualifying for the 2014 World Cup behind winners Russia and Portugal.
The Israel Football Association confirmed that the 55-year-old is tasked with leading the team through their qualifying campaign for the UEFA European Championships in 2016.
If successful, it will be the first time that Israel have reached the finals.
"The secretariat approved the continued appointment of Eli Guttman as coach of the national team next for the two years," the Israel FA said on the organisation's official website.
"Guttman will lead the team (for their) qualifiers for Euro 2016."
