Selig has held the position since 1992, first as acting commissioner and then as commissioner since 1998. He will turn 80 in July 2014.
If he stays until September 2016, he would surpass Kenesaw Mountain Landis (1920-44) as the longest-serving baseball commissioner.
Selig's contract had been due to expire this Dec. 31.
After owners approved the extension Thursday Selig said he was "very humbled by the request to stay on."
Selig repeatedly has said since 2006 his retirement is imminent but also admits almost no one believes him.
Owners deferred a vote on the proposed transfer of the San Diego Padres from John Moores to Jeff Moorad, saying they needed more financial information.