The deal comes after Goncalves steered Angola to the quarter-finals of the 2008 Nations Cup in Ghana.
Goncalves said he had been approached to coach Morocco who recently parted company with Frenchman Henri Michel.
But when offered the new deal, Goncalves conceded it was too good to turn down as ‘Angola are the priority’.
Justino Fernandes, chairman of the Angolan Football Association (FAF) said Goncalves had deserved a new improved deal.
“After the last four years we have confidence in him. He will stay until the 2010 Africa Cup of Nations,” Fernandes said.