He'll now remain in office until the end of January 2020, roughly halfway through a period meant to smooth the U.K.'s withdrawal from the European Union.
The pound was little changed after the news, despite the extension being shorter than some reports had suggested. He extended it by a further year in the aftermath of the Brexit vote.
Before Carney joined the BoE in July 2013, he said he only wished to serve five years of the standard eight-year term for a BoE governor to minimise his children's time away from their native Canada.
Hammond added: "I'm delighted to announce the re-appointment of Sir Jon Cunliffe for a further term as Deputy Governor, and I'm confident his extensive experience will continue to be a valuable asset to the Bank of England".
The re-appointment is officially made by the Queen, on the advice of Hammond and the prime minister, Theresa May.
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Last month he warned that the risk of a "no deal" divorce with the European Union was "uncomfortably high" and "highly undesirable".
The Canadian economist had been due to step down in June 2019, but will now stay on until 31 January 2020.
In his letter today, the chancellor explained that Mr Carney's extension was entirely Brexit related.
He says: "Accordingly, I am willing to do whatever I can in order to promote both a successful Brexit and an effective transition at the BoE".
"A governor who was leaving at the end of June, with his bags already packed, would be in a poor position to represent the United Kingdom in what might be some quite critical - and time critical - negotiations over that period".