Linked to a role within the All Blacks set-up, the 51-year-old has rebuffed any potential moves by signing a new deal to remain in his home town.
The decision sets him up to take on the Wallabies role should incoming Test coach Les Kiss call time at the end of his contract, which also runs until 2028.
The decision comes on the day New Zealand Rugby announced the appointment of former Wallabies coach Dave Rennie as All Blacks coach through to the 2027 Rugby World Cup.
Rennie will honour his commitments with the Kobelco Kobe Steelers until the conclusion of the Japan Rugby League One competition, before returning to New Zealand to prepare for the July home series against France, Italy and Ireland.
A former Brumbies and Wallabies playing great, Larkham has continued to deliver results, with the ACT outfit consistently the best Australian performers.
The club have started the 2026 season with a 3-0 record, including their first win over the Crusaders in 26 years.
Last year they snapped a 12-year drought at Eden Park with a win over the Blues.
"I'm really excited to continue working with this group of players," Larkham said in a statement.
"We've built a squad with tremendous potential, and I want to help them develop and deliver rugby that the Canberra community can be proud of.
"This city and this club have always meant so much to me and being able to contribute in this way is very special."
Brumbies chairman and former Test teammate Joe Roff described the two-year contract extension as a "huge win".
"Locking Steve down ahead of interest from other major suitors is a huge win for Canberra and the Brumbies," Roff said.
"His commitment to the club ensures stability and allows us to continue building a high-performance environment with a clear long-term vision."
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