He remains a key player for both his province and country and returned from injury prior to this season's Six Nations championship to come back into the Ireland team to play in three games in the tournament.
Commenting on his decision to stay with Leinster, he said: "Leinster has been a happy home for me throughout my career. While I have had some incredible memories playing in the blue jersey, the desire for me to win further honours at Leinster was the deciding factor for me to agree my contract extension.
"The decision of Michael (Cheika) to remain with Leinster and the return of Alan Gaffney along with Kurt McQuilkin is an indication of how Leinster wants to continue to build for the future and I am delighted to remain a part of that."
Commenting on the announcement, IRFU Chief Executive Philip Browne said: "We are delighted that Shane has committed his future to playing in Ireland for Leinster. The IRFU will continue with its strategy of keeping as many of our leading players within our provincial structures in Ireland.
"As the environment of professional rugby changes, the need for Irish rugby to have control of our players' development and well-being is becoming increasingly important. This model remains the determined strategy of the IRFU and has served us well in the past and still remains our best course for the future."
Leinster Chief Executive Mick Dawson added: "Since making his senior debut for the province a little under 10 years ago, Shane has gone from strength to strength culminating in selection for the British & Irish Lions tour to New Zealand in 2005. Shane has been a consistent force in the back-line, be it in the blue of Leinster or indeed the green of Ireland.
"I am sure that I speak on behalf of the entire Leinster support when I say how delighted we are that he has followed the likes of Brian O'Driscoll and Gordon D'Arcy in re-signing for the province for the coming years."
Expressing his pleasure with the deal and the important role Horgan plays for his team, Leinster coach Michael Cheika said: "Shane has performed at a consistently high level for province and country over the years and, speaking from personal experience, he has been an integral part of the Leinster team in my time as coach. His try-scoring ratio of roughly one every two-and-a-half games tells only part of Shane's value to the squad.
"He has a knack of scoring important tries in key games, a point illustrated by his contribution to the victories at home to the Leicester Tigers and away to the Ospreys, Munster and more recently, Connacht.
"I am confident that his best years are ahead of him. As one of the squad leaders he embodies heart, drive and skill and today's announcement gives the entire squad a timely boost ahead of an important few weeks for Leinster in the Magners League," he added.