The 37-year-old replaced Stefano Pioli in the pre-season.
“The contract renewal makes me very proud, as it means the club has faith in me and are happy with what I have done so far,” he said.
Palermo director of football Sean Sogliano resigned from his position earlier in the week.
“At the same time, I feel sad that Sean Sogliano has resigned. He was the one who brought me here and he believed in me all the way. I had no idea his situation was so troubled,” Mangia said.
