Dyche, whose contract was due to expire in the summer, succeeded Frank Lampard on 30 January 2023 with Everton in the relegation zone.
The team secured survival with a 1-0 win against Bournemouth on the final day of that season.
He then steered the Toffees to a 15th-place finish in the 2023-24 campaign despite the Merseysiders being deducted eight points for two separate breaches of Premier League financial rules.
The club have looked strong defensively this season, keeping seven clean sheets.
But they have struggled for goals, netting only 15, and are the second-lowest scorers in the league, with only bottom club Southampton having managed fewer.
This is Everton’s last season at their 132-year-old stadium before moving to a new ground at Bramley-Moore Dock.
The US-based Friedkin Group completed a £400m takeover of the club last month.
