The 32-year-old has been rewarded for guiding the Royal Blues to second place behind Bayern Munich in his first season in charge by seeing his contract, which was originally due to expire in 2019, extended by three years.
WATCH: Owo meets Tedesco
"I've always said that I feel completely at home here," Tedesco told schalke04.de. "I love working with this team, it's so much fun because they're always ready to take the next step so that we can develop on a sporting level. The same goes for the work with the board, the support from the committee and the employees of the club. They all motivate us a lot, to play for the fans, who support this club and the team so brilliantly. I'm therefore really looking forward to being part of the Royal Blue family for the coming years."
In addition to finishing second in the Bundesliga and qualifying for the UEFA Champions League, Schalke reached the semi-finals of the DFB Cup last term, providing a strong base on which to build in the coming years.
"Continuity is an important fundamental for the goals we've set ourselves in the coming years, particularly when it comes to the manager, who from a sporting perspective is the most important man at the football club for me," said Schalke's sporting director Christian Heidel. "As a result we're delighted to have found a coach in Domenico Tedesco who, in addition to being highly skilled and socially aware, is not just bold, innovative and active in communication, is someone who has taken on board and grasped everything that Schalke is about in a short space of time."
Tedesco started his coaching career with Stuttgart's youth team between 2013 and 2015 and then helped Erzgebirge Aue avoid relegation from Bundesliga 2 in the second half of the 2016/17 season, catching Schalke's eye in the process and moving to Gelsenkirch in time for the 2017/18 campaign.