Parkinson, whose original deal was due to expire at the end of this season, has signed a fresh three-year contract at the Coral Windows Stadium which will extend his association with the football club until the end of the 2017/2018 campaign.
Assistant Manager Steve Parkin, Head of Sports Performance Nick Allamby and Goalkeeper Coach Lee Butler have also agreed new contracts with the football club until the end of June 2018.
Joint-Chairman Mark Lawn said: "This club is clearly moving in the right direction under Phil and the current management team, and it is important we keep the wheels moving forward.
"The momentum has been with us since Phil arrived at the football club and he deserves this new contract.
"We have improved year after year with Phil at the helm and I think that goes to show the success you can achieve with longevity and stability."
Parkinson himself added: "I'm very proud of my record here at Bradford City so far but I have been very lucky to receive the backing I've had from the chairmen and the board.
"You always need good people around you as a manager, and I think we have a very good team both above me at boardroom level and around me at the training ground.
"We are all still striving to keep improving - that is the key. Hopefully we can continue to do that and make this season a successful one.
"It is a fantastic honour to be the manager of this football club. Every time I drive to the ground for a match-day, I always get a feeling of immense pride that I am the manager of Bradford City.
"I take this job very seriously because I know I am representing the city of Bradford and our thousands of supporters.
"I know there is a lot of responsibility that comes with this job but I have enjoyed every minute of it, even during the tough early times.
"We learned a lot through those challenging periods and I am ambitious to keep carrying the club forward again."
The Bantams boss recently celebrated his four-year anniversary as manager of the club just under two weeks ago with the home victory over Port Vale.
His four years at the helm at the Coral Windows Stadium currently makes him the sixth longest-serving manager in the Premier League and Football League combined.
He is City's longest-serving manager since Trevor Cherry, who led the Bantams between 1982 and 1987.
In fact, only Cherry and Bryan Edwards have managed City for longer than Parkinson since the 1950s.
This Saturday's trip to Fleetwood Town will be Parkinson's 226th in charge of Bradford City.
Under Parkinson's leadership, City have enjoyed countless memorable occasions, including cup triumphs over the likes of Arsenal, Aston Villa, Leeds United, Sunderland and Chelsea, a place in the Capital One Cup Final and the FA Cup Quarter Finals, plus promotion into League 1 via the Play-Offs in 2013.
Parkinson also led City to seventh in the League 1 table last season, with the Bantams narrowly missing out on the end-of-season Play-Offs by just one place.
Including the seventh-placed finish last campaign, City have actually improved their final league position each and every season during Parkinson's four years in charge.