The 30-year-old second-row forward, who can play at lock or flanker, made his debut for Munster in 2004 after graduating from their academy system and has gone on to win 28 caps for Ireland to date.
Munster coach Rob Penney said: "We are delighted that Donnacha has signed a new IRFU contract which will ensure that he remains a Munster player until the end of the 2017 season.
"Donnacha's quality and versatility will continue to be major assets for the squad as well as the key leadership role he plays both on and off the field."
Ryan had been a reported target for Aviva Premiership side London Irish, who are looking to increase their Irish links following their takeover by a consortium headed by Irish businessman Mick Crossan.
Philip Brown, chief executive of the IRFU, was pleased that Ryan has decided to stay in Ireland for the foreseeable future.
Brown said: "Donnacha has proven his worth to Irish rugby with his intelligent and high-intensity performances for both Munster and Ireland.
"The IRFU is delighted to secure his future in Ireland for the next three years."