The 21-year-old's recent form had resulted in him being linked with a handful of English clubs.
However, he has now decided to commit his future to the RaboDirect PRO12 outfit until the summer of 2016.
"I'm delighted for Kieran and for Connacht Rugby that we have this new deal," said Connacht head coach Pat Lam.
"Kieran is a fantastic player and a key member of our squad and it's a real boost that he sees his continued development and future with the club he started his professional career with.
"From day one, Kieran has impressed me with his attitude, work ethic and incredible maturity and I have no doubt that he will go on to achieve great things within Connacht and Irish rugby."
Marmion toured North America with the senior Ireland side earlier this year.