Mourinho, the self-styled Special One, joined Real from Inter Milan in 2010 on a four-year deal and led them to victory in the King's Cup final in his first season, the club's first cup triumph in 18 years.
They won their first La Liga title for four years this month, smashing league records along the way and ending Barcelona's domestic dominance.
Real set a new points record of 100 from 38 games, beating the previous best of 99 achieved by Pep Guardiola's side in 2009, and broke the league's goal-scoring record of 107 set by the Whites in 1989-90 by finding the net 121 times.
On a personal level, the league title was Mourinho's seventh after winning two in Portugal with Porto, two in England with Chelsea and two in Italy with Inter.
Mourinho's next big challenge is to win a 10th European Cup for Rea, and his third with a different club after Champions League successes with Porto in 2004 and Inter in 2010.
Real have fallen in the semi-finals to Barcelona and Bayern Munich in his two years in charge. The last time they reached the final four before then was 2003.
The 49-year-old has fought for and won unprecedented freedom and power as their coach with the full backing of club president Florentino Perez. His new commitment to Real ended any speculation that he might be lured away elsewhere.
The show of unity and strength at the world's richest club by revenue comes at a moment when their great rivals Barcelona appear to be entering a period of transition.
Mourinho's opposite number Guardiola has decided to step down at the end of the season after winning 13 trophies in four years at the Nou Camp.
He could add a 14th if Barcelona win this year's King's Cup final against Athletic Bilbao on Friday.
Guardiola said he needed time out to recharge his batteries and is to be replaced by his assistant Tito Vilanova next season.
NEWS: Apr 25 2012 -Real doctor reveals Mourinho is staying at Madrid next season
