Hughton, who was under contract until 2020, has been rewarded for keeping the Seagulls in the Premier League after promotion from the Championship last year.
The 59-year-old was appointed Albion boss on December 31, 2014, when the club were struggling in the Championship. He led them clear from danger, before they agonisingly missed out on promotion through goal difference the following season and then lost to Sheffield Wednesday in the play-offs.
Brighton responded to win promotion in the 2016/17 season and Hughton guided the club to a 15th-placed finish in the Premier League this year.
On the new deal, Hughton said: “I’m delighted to have extended my time with the club, and I would like to thank the chairman, the board, my staff and everyone at the club, including our fans, for the support we’ve had in achieving our aims.
“The set-up in terms of the training ground and excellent facilities, and the professionalism of all the staff across the club gives us a platform and creates an excellent environment for us to work on a daily basis - and I would like to thank everyone at the club for their efforts this season.
“Our second season will be tougher, and we will need that spirit of togetherness to help us continue to progress - but once we’ve had a well-earned break and reflected on the season just gone, we will begin planning for 2018/19.”
Albion chairman Tony Bloom said: “Chris’s record as our manager is absolutely superb, he has been great for the club and his measured and calm approach brings out the very best in all around him.
“Our first-ever Premier League season has been a brilliant experience for the club, with some iconic moments, including an unforgettable night at the Amex against Manchester United to secure our Premier League status earlier this month.
“Chris’s diligent approach is respected across football. He thoroughly deserves his new contract and on behalf of everyone at the Albion I’d like to thank him for a wonderful season.”
Chief executive Paul Barber added: “Chris has been an absolute pleasure to work with on a day-to-day basis. He understands the club, the community and what it takes to make progress and bring success - and he is delivering both on and off the pitch.
“His record since arriving three and a half years ago has been outstanding, and I would like to add my congratulations as he thoroughly deserves this new contract.”