The 55-year-old is entering his second full season. He replaced Ralph Krueger on May 17, 2021, and was retained June 29.
"Don's passion for the game and leadership skills have been on display since the moment we met," Sabres general manager Kevyn Adams said. "He is someone who the players have a tremendous amount of respect for, and he dedicates himself to bettering each individual on the team.
"Don's mentality of 'earning it' resonates throughout the team. It is more than just a mindset. It is a driving force for our players and staff. I appreciate his thoughtfulness when it comes to developing our players and the open communication we are able to have about the team. I am happy to extend Don's contract, keeping him in Western New York for many years to come."
The Sabres were 32-39-11 last season but went 16-9-3 in 28 games after March 2, a .625 points percentage that was tied for 12th in the NHL with the Stanley Cup champion Colorado Avalanche. Buffalo has not made the Stanley Cup Playoffs since 2011 but returns a core group of young players led by defensemen Rasmus Dahlin and Owen Power, the No. 1 picks in the 2018 and 2021 NHL Drafts, respectively.
"We need to get stronger, and we need to focus on that and grow," Granato said. "Winning some games last year, yeah, it's reassuring. But it's not what we want. Our appetite is much, much bigger than that. So, it just drives our group for more."
Adams signed a multiyear contract as GM on Sept. 21.
"I mean we have a long way to go," Adams said. "We have to earn everything. This time last year, we talked a lot about we have to earn the respect within our locker room of each other. We have to earn the respect through the staff. We have to earn the fans' respect. We have to earn the media's respect. And I think our guys took that to heart and took some big steps last year in connecting with what it means to be a Sabre, and really showing that they want to be here for the right reasons."
The Sabres begin their season at home against the Ottawa Senators on Thursday (7 p.m. ET; MSG-B, TSN5, RDS, ESPN+, SN NOW).
"He's the best," Dahlin said of Granato during the NHL North American Player Media Tour last month. "The way he came in, the way he taught it to us and made us play fearless [and said] 'Go ahead and do your thing. As long as you try and keep trying, things will get better.' I really started doing my thing and that's all because of him."
Defenseman Mattias Samuelsson signed a seven-year, $30 million contract ($4.29 million average annual value) on Wednesday.
NHL.com senior writer Dan Rosen and independent correspondent Heather Engel contributed to this report