The announcement comes just days after forwards coach Ioan Cunningham also committed his future to the Llanelli-based side.
Jones, one of Wales’ most successful backs and the country’s second highest points scorer, has played a pivotal role in developing the Scarlets’ exciting and attacking style of play.
He said: “I’m pleased to extend my time with the Scarlets, especially as we head towards a pivotal period in the season.
“We’ve been working tirelessly behind the scenes over the last few years and the players have bought into the ethos with great enthusiasm and energy.
“We’re seeing the improvements on the field and it’s great to see such a high number of the region’s young talent making a name for themselves in the Pro12 and stepping up to the plate in Europe.”
The Scarlets sit fourth in this season’s Pro12 and are still well in contention for a play-off place.
Carmarthen-born Jones, who made over 300 appearances for Llanelli and Scarlets over a 14-year period, joined the Parc y Scarlets coaching team ahead of the 2015-16 season.
He also had a previous role in Dai Young’s backroom team at English side Wasps.
Scarlets head coach Wayne Pivac said: “We’re delighted to be announcing that Stephen has put pen to paper on a new deal only a few days after announcing a new deal for Ioan.
“We have another big challenge ahead of us this weekend as we do everything within our power to secure a place in the top four. A big part of the success is the compatibility of the management group and the fact that it’s enjoyable coming to work every day.
“Stephen is a tireless worker and his enthusiasm, as well as his technical and tactical ability, rubs off on the boys and that is evident both on and off the field.”
