The deal was announced Monday by athletic director Paul Krebs. Financial terms were not disclosed.
Neal's original five-year contract ran through the 2017-18 season. The new deal runs through 2019-20.
After six seasons as the associate head coach, Neal led New Mexico to a 27-7 record this season, including a 15-3 mark in the Mountain West.
Neal's 27 wins is tied for the 12th-most in NCAA history for first-year head coaches.
He became the first New Mexico coach to bring the Lobos to the NCAA tournament in his initial season.