Shevchenko, 44, was appointed head coach in 2016 and led Ukraine to the quarter-finals of Euro 2020, where they were beaten 4-0 by England in Rome.
“Together, we managed to show that our football can be competitive, productive and exciting,” he said.
Shevchenko, who retired from playing in 2012, is Ukraine’s all-time record goalscorer with 48 goals in 111 games.
He began his playing career at Dynamo Kyiv before joining AC Milan in 1999, where he won five major trophies including the Serie A title and Champions League, as well as Ballon d’Or in 2004.
Shevchenko joined Chelsea in 2006 for £30m, where he won the FA Cup and League Cup, before returning to Milan for a loan spell in 2008.
He left Stamford Bridge permanently to re-join boyhood club Dynamo Kyiv the following year.