The 44-year-old coach was 23-28-5 last season with the Senators, who finished sixth in the seven-team Scotia North Division. The top four teams qualified for the Stanley Cup Playoffs.
Smith had one season remaining on the contract he signed when he was hired May 23, 2019. His extension will run through the 2023-24 season, and there is a team option for 2024-25.
"We've had a lot of tough days," Smith said. "We're certainly in a far better spot than we were a couple of years ago where you are starting to see some light at the end of the tunnel here. And for them trusting me to continue to guide this group, I couldn't be happier for myself and my family to be allowed this opportunity."
Ottawa was 14-10-4 in its final 28 games after starting the season 9-18-1 in its first 28.
"We're growing together," Smith said. "I've made a lot of mistakes as head coach. Players make mistakes all the time. And I think we're growing together as a group. I think it's really exciting as a group."
Smith is 48-62-17 in two seasons with Ottawa. He worked the previous four as an assistant for Mike Babcock with the Toronto Maple Leafs.
"Teamwork is the key to success in any organization," Senators general manager Pierre Dorion said. "D.J.'s exceptional ability to communicate with our players, with the team's coaching staff and with our management group is one of his greatest attributes. He consistently has the team prepared to play hard and energetically which is what we want displayed as our identify. He's very deserving of this extension."
Prior to his time in the NHL, Smith coached for three seasons with Oshawa of the Ontario Hockey League. He was named the OHL Coach of the Year after going 42-20-6 in 2013-14. He led Oshawa to the championship the following season after going 51-11-6 during the regular season.
Smith was a second-round pick (No. 41) by the New York Islanders in the 1995 NHL Draft. He played 45 NHL games as a defenseman with the Maple Leafs and Colorado Avalanche, scoring one goal and one assist.
"D.J. Smith represents an integral component of our long-term vision," Senators owner Eugene Melnyk said. "He's a tireless worker who has done a tremendous job over the last two years in molding our core group of players into a cohesive unit. His admirable combination of passion, energy and positivity has been the driving force in instilling a culture that we want to maintain here for years to come."
NHL.com staff writer Mike Zeisberger contributed to this report
