Taylor was appointed interim boss at the League One outfit in October following the sacking of Martin Allen.
The 60-year-old has overseen victories in two out of four league games, although Gillingham did require an injury-time equaliser on Saturday to avoid FA Cup embarrassment at the hands of non-League Brackley Town.
Chairman Peter Scally held a meeting with the first-team squad on Monday to confirm Taylor will continue at the helm.
"The players and I are delighted that Peter has agreed to stay on at the club and we wish him every success in his ongoing efforts to push the team up the table," Scally told the club's official website.
Taylor had a one-match stint as caretaker manager of England in 2000 and two separate spells in charge of his country's Under-21 side.
A vastly experienced boss, his numerous former employers also include Bahrain, Leicester City and Crystal Palace.
Gillingham sit 18th in League One, two points clear of the relegation zone.
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