The 28-year-old, who is celebrating his testimonial season at Easter Road, has scored 20 goals in 340 appearances for Hibs in a 10-year spell.
Club boss Neil Lennon claimed that the decision to hand Hanlon a new deal was a no-brainer after the player's impressive displays this term.
"I'm delighted as he deserves it," Lennon told the official Hibs site.
"He's been tremendously consistent for me over the last two years and tremendously consistent over the last 10 years.
"He's getting better. At 28, he's coming into his peak years so it's a great bit of business for the club. He's very content here and has been outstanding this season."
Hanlon, meanwhile, said: "I am delighted to have extended my stay at the club.
"Everyone knows I grew up a Hibs fan - playing for your boyhood heroes is what every kid dreams about and I am very happy that I'll get to do that for another few years.
"The club is in a great position at the moment - we've had a strong first season back in the Premiership and things are looking good on and off the park."
Hibs currently sit fourth in the Scottish Premiership table and host Celtic on Saturday.