Meehan joined Bath as an assistant coach in the summer of 2006 after four years at French giants Stade Francais, before being promoted to the top job after only a month when Brian Ashton left to take on the England coaching job.
The Australian led Bath to their first silverware in ten years when they lifted the European Challenge Cup in 2008.
And he said he is 'very happy to be staying'.
'To continue working with these players, for this club, and its supporters, is a real privilege,' Meehan explained.
'The Guinness Premiership keeps throwing up challenges to us, as does the Heineken Cup.
'The immediate goal is to find the solutions that put us back at the top and then longer term to help the club maintain the recently established values that will keep us there.'
Bath have made an indifferent start to the 2009/10 season, with just one win in their opening five Guinness Premiership fixtures and a 26-12 defeat to Ulster in their first game of the Heineken Cup at the weekend.
But Bath chief executive Nick Blofeld said he is pleased to have retained the services of the head coach.
'We are delighted Steve has pledged another two years to Bath and the whole team, on and off the pitch, are keen to keep improving,' he said.
'I think we have the squad, coaches and support team to be regularly finishing in the top four of the Guinness Premiership and challenging for major honours, domestically and on the European stage, over the next few years.'
Last season Bath finished fourth in the domestic league table, and lost in the playoff semi-finals to eventual winners Leicester Tigers. The same team also knocked Bath out of the Heineken Cup at the quarter-final stage.
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