The 48-year-old former Papua New Guinea international was appointed for the 2019 season following the departure of long-serving head coach Shaun Wane.
Lam was due to hand over the reins after his 12-month stint to another former Wigan half-back, Shaun Edwards, but the latter's decision not to take up the club's offer of a three-year contract created a long-term vacancy.
Lam said: "I am very honoured and privileged to remain on as head coach of the Wigan Warriors for the 2020 season.
"I have great memories as a player at our great club and I look forward to creating more in the future as coach.
"As coach, I am most looking forward to developing and bringing through the next generation of young Wigan players and help progress the style of play which we have built on for the 2019 season.
"I would personally like to thank our Wigan fans and the club for your support through the 2019 season."
Lam, who left his job on the backroom staff of Sydney Roosters to coach Wigan, endured a difficult start, with three wins from their opening 11 Betfred Super League matches.
However, the Warriors go into Friday's derby at leaders Wigan on the back of a five-match winning run that has lifted them to fourth place in the table.
Wigan executive director said: Kris Radlinski: "With many off-field distractions, Adrian has done well to steady the ship and climb the Betfred Super League table.
"Throughout the season Adrian has known exactly where he stands. An interim head coach was not an ideal position, but he dealt with what was a very difficult situation well with integrity and class.
"With this announcement out of the way, he can concentrate on a strong end to the season and put plans in place for next season. We're happy to have Adrian with us for 2019 and beyond."
Lam spent four seasons as a player with Wigan from 2001 and was in their Challenge Cup-winning team of 2002.
He returned to Australia in 2004 to join Cronulla and has also been on the staff at St George Illawarra and the Roosters, as well as coaching Papua New Guinea in the 2008 World Cup.
