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The former Aberdeen defender and manager returned to the club in 2004 after a nine-year gap following his sacking in 1995.
In his first week as Director of Football, the 52-year-old fired underachieving boss Steve Paterson and brought in current gaffer Jimmy Calderwood and assistant Jimmy Nicholl.
AFC Head of Operations Duncan Fraser has also signed a three year contract, and has been promoted to the post of Managing Director.
Aberdeen chairman Stewart Milne said: "The Board is delighted that Willie and Duncan have both agreed to extend their stay here during what is a particularly challenging time for Aberdeen Football Club.
"Willie was central to persuading the two Jimmy's to move to the North east and his status in the game has been instrumental in helping attract the calibre of player we want at Aberdeen.
"He has also been at the heart of shaping the youth development operation to ensure we are in the best position possible to attract the top youngsters from around the country."
Chartered accountant Fraser, 43, said: "I am delighted that the board has the faith in me to lead the off-the-pitch team and drive forward our business plan.
"I will continue to work alongside Willie Miller to ensure that the non-football operations and the football operations are fully aligned to delivering success on the pitch."