The Birmingham-born coach masterminded the Warriors being crowned RFU Championship winners last season - with it promotion back to the top-flight at the first time of asking - while developing a new style of rugby and a winning culture both on and off the field.
The former Bath and England international scrum-half was contracted until the end of the forthcoming Aviva Premiership season, but has now agreed fresh terms to commit to Warriors until at least the end of the 2013/14 campaign.
"I'm delighted to extend my contract with Worcester Warriors as this is a very exciting place to work with a bright future," said Hill.
"We've done the work we needed to do last season, after the club had spent six years in the Premiership. We've developed and changed the culture and work ethic. The club is now much stronger and ready to tackle the English elite once again.
"I initially signed a two-year contract at Worcester as both parties wanted to see how things went," he added. "I thoroughly enjoyed my first season and what has been very clear to me is the huge potential here at Sixways. Cecil Duckworth believes in continuity and I have worked to establish that within our backroom and coaching staff.
"We have goals in place in terms of our return to the Aviva Premiership and our recruitment next season, which is crucial. The first thing that many potential players ask is when your contract as coach is up. I'm now in a position where they can see my long term commitment to drive this club forward."
Charlie Little, Managing Director at Warriors, believes Hill is the right man to bring success to Sixways in both the Aviva Premiership and Europe in the years to come.
"When Richard came to the club he was tasked primarily with one main objective - to get us back from the RFU Championship to the Aviva Premiership," he said. "It was probably a harder task than we all imagined, such was the quality of rugby in the league and the format of the competition we had to work our way through.
"Not only has he delivered that, but he has brought in a strong work ethic, winning culture and accountability across all departments. He is on his way to building what we believe will be a highly professional squad capable of achieving our aims and ambitions in the coming years.
"It's also important for playing department recruitment and retention to have stability in the coaching set-up. We're delighted that Richard has accepted a two-year extension and therefore will be here for the next three years, in which he intends to deliver the success that we and all the fans crave."