The Scot succeeded John Lloyd in 2010, when GB were on the verge of relegation to the competition's bottom tier.
In November, Smith led the team to their first Davis Cup title in 79 years with a 3-1 victory over Belgium.
"It is a huge honour and privilege to continue captaining our Davis Cup Team," said Smith, whose side have won 13 of their last 15 ties.
"We have achieved so much over the last six years and becoming world champions last year will be the highlight of my career.
"I'm really excited at the opportunity to continue working with this group of players, support staff and of course our fans. Our Davis Cup journey has captured the imagination of so many people across the country and I'm looking forward to using our Davis Cup successes as a way to get more kids playing tennis."
Lawn Tennis Association chief executive Michael Downey said he was delighted about Smith's contract extension.
"As I said after Leon led the Great Britain team to the title in Ghent, we are lucky to have the world's best Davis Cup captain lead our nation," he added.
Andy Murray helped Britain to a 3-1 victory over Japan in the Davis Cup 2016 first round last weekend. They will play Serbia away in July's quarter-finals.
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Leon Smith has signed a new contract to remain Great Britain Davis Cup captain for the next three years.