Lieutenant-General Ahmad Shuja Pasha, director general of the military's Inter-Services Intelligence (ISI) agency, had been due to retire last year but the government extended his tenure until last month.
Prime Minister Yousaf Raza Gilani said on Friday the ISI chief's term had been extended again by a year.
"The situation we are passing through needs continuity," Gilani said on state-run television.
Pasha, a former head of military operations for the army, was appointed ISI chief in September 2008, at a time when US officials questioned the reliability of the spy agency in the campaign against militancy.
Since then, the security forces have taken concerted action against militants fighting the state, although doubts linger about Pakistan's commitment to fighting Afghan Taliban militants based along the lawless border.
Pasha is generally seen as getting on well with his US counterparts, although ties between the spy agencies of the two allies have been strained recently over the case of Raymond Davis, a CIA contractor who killed two Pakistanis in what he said was in self-defence in Lahore in January.
Pakistan held Davis despite US insistence that he enjoyed diplomatic immunity. He was released last month after the families of the dead men were paid compensation, a custom in Pakistan and sanctioned in Islam.
US forces hope to begin a gradual withdrawal from Afghanistan later this year and Pakistan is seen to have a crucial role in stabilising the region.
India and Afghanistan view the spy agency, which is often referred to as a "state within a state", with great suspicion. Pakistan's civilian politicians also fear it for its role in past military coups. Pasha is a close confidant of army chief General Ashfaq Kayani who also received a three-year extension last year.
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