The South African, 65, arrived at Murrayfield on a two-year deal in the summer of 2013 and agreed a one-year extension in May.
"While we have made good progress over the past two seasons, we still have some way to go," said the former Springboks assistant coach.
"I am pleased to be able to continue to build on what we have achieved."
Edinburgh made a strong start to the 2015-16 campaign, winning their opening four league matches, and sit sixth in the table after eight fixtures.
They have also won both of their group matches in the European Challenge Cup, having finished as runners-up in the tournament last season.
"Alan is successfully building on the improved performances achieved by Edinburgh Rugby last season," said Scottish Rugby chief executive Mark Dodson.
"The club has made a positive start to the new season and we wanted to ensure Alan was able to continue to develop the vision he started in 2013."
Solomons takes Edinburgh to former club Ulster on Friday evening, where he ended a three-year stint in 2004.
Head coach Alan Solomons has extended his Edinburgh contract, keeping him at the Pro12 club until June 2017.