Merz, who swapped her chairman role for CEO after the resignation of former boss Guido Kerkhoff last year, was originally meant to stay in the job until the end of September.
The supervisory board's personnel committee on Friday recommended appointing Merz for a three-year term starting on April 1, 2020. Her delegation from the steering committee would end as a result.
"This is the best conceivable solution for the company. Martina Merz has proven that her approach is the right one and that her consistency is effective," Chairman Siegfried Russwurm said.
"The changes in the company are clearly visible. We want her to continue with the same vigour."
The appointment gives Merz tailwind to move ahead with the restructuring of the group, the first major step of which was achieved last month through the sale of its elevator unit to a consortium led by Advent and Cinven [CINV.UL].
The appointment was welcomed by Thyssenkrupp's largest shareholder, the Alfried Krupp von Bohlen und Halbach foundation, which owns 21% of the group.
"Mrs. Merz has done so far a very good job as Thyssenkrupp's executive Board Chairwoman and is developing the company emphatically in the right direction in a difficult phase," it said in a statement.
Further steps are likely to include painful job cuts and additional asset sales. Merz will assume responsibility for Plant Technology, a division for which Thyssenkrupp has started a disposal process, the company said.
Chief Financial Officer Johannes Dietsch will resign effective March 31 and be replaced by Klaus Keysberg, already a member of the management board and in charge of the steel and materials trading business units.
(Editing by Thomas Seythal, Nick Tattersall and Andrew Cawthorne)
By Christoph Steitz
