The 34-year-old will now remain in Limerick and Cork until at least the summer of 2016, increasing his hopes of adding to his Heineken Cup wins of 2006 and 2008.
O'Callaghan was a vital figure in both Munster's previous title winning seasons, playing in all nine games in both campaigns, including the final victories over Biarritz Olympique and Toulouse in Cardiff.
His decision to carry on with his stellar career beyond the end of the 2013/14 season also means he is highly likely to hit a century of appearances in European competition. O'Callaghan currently has 92 European caps to his name, with 90 coming in the Heineken Cup and two in the Amlin Challenge Cup.
If Munster make it all the way through to either final this season and the veteran second row plays in every fixture along the way, that would take O'Callaghan up to 99 prior to the start of his new deal.
"I love playing for this team and representing my home club and supporters each week," said O'Callaghan, who first featured in the Heineken Cup back in the 1998/99 season.
"Running out for Munster is something I've always wanted and I've been fortunate to make my career out of it, and to continue doing so for the next few years is just what I want.
"The main thing for me is that I still enjoy it and I've the opportunity to do it."
O'Callaghan has been capped 94 times by Ireland and been on two British & Irish Lions tours and is unsurprisingly a major influence off the pitch as well as on it with his province.
Munster have lost the likes of Ronan O'Gara, John Hayes and Alan Quinlan to retirement in recent times, so head coach Rob Penney is particularly delighted that O'Callaghan will be sticking around for the foreseeable future.
"We are lucky to have someone of Donncha's calibre and experience commit his future to Munster Rugby," said Penney.
"He is great with the younger lads and drives everyone on. His own dedication and work ethic are an example to all and it's good to know he is on board for another two seasons."