Penev, 47, has agreed a fresh two-year extension to his deal, as Bulgaria aim to qualify for the Euros for the first time since 2004.
Bulgaria finished fourth in Group B of FIFA World Cup qualifying, having been second before suffering costly defeats to Armenia and the Czech Republic.
Penev – who took over in November 2011 as a replacement for Lothar Matthaus – was initially given a two-year deal, but the Bulgarian Football Union (BFU) are pleased to have retained his services.
"BFU's president Borislav Mihaylov and Luboslav Penev concluded their negotiations, reaching an agreement to extend the coach's contract," a BFU statement read.
"We are delighted to announce the signing of the new deal and we are looking forward to the Euro 2016 qualifiers."
