The former England scrum-half guided Worcester to last season's Championship title and has been in charge at Sixways for 12 months.
He was contracted until the end of the new campaign. which kicks off on September 3, but his new deal will keep him with the Warriors until at least 2014.
"We've done the work we needed to do last season after the club had spent six years in the Premiership," said Hill.
"We've developed and changed the culture and work ethic. The club is now much stronger and ready to tackle the English elite once again.
"I initially signed a two-year contract at Worcester, as both parties wanted to see how things went.
"I thoroughly enjoyed my first season, and what has been very clear to me is the huge potential here at Sixways.
"We have goals in place in terms of our return to the Aviva Premiership and our recruitment next season, which is crucial.
"The first thing that many potential players ask is when your contract as coach is up. I'm now in a position where they can see my long-term commitment to drive this club forward."
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
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Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
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The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
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The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.
