The Fijian international re-joined the Scotstoun club ahead of the 2017/18 season having originally signed in 2012. He has gone on to play 103 games over his two spells in Glasgow, scoring 38 tries in the process.
He has been in fine try scoring form so far this season, crossing the whitewash seven times in his last four appearances.
Matawalu, 29, has established himself as a firm favourite amongst Warriors supporters during his time at the club, with his pace and flair producing countless memorable moments in a Glasgow shirt.
A member of the 2015 Guinness PRO12 winning side, the wing/scrum-half has played 32 times for his country as well as representing them on the HSBC World Rugby Sevens Series.
He becomes the eighth player this season to commit to the club following the news that Tommy Seymour, Stafford McDowall, Oli Kebble, Sam Johnson, George Horne, Adam Hastings and Grant Stewart have all put pen to paper.
Earlier today he was named amongst the replacements for tomorrow's 1872 Cup fixture at BT Murrayfield.
Speaking to glasgowwarriors.org, Matawalu said: "I'm so happy. Glasgow is my first professional club and I am so proud to have played over 100 games here.
"This city is my second home now and playing at Scotstoun is an experience that is very special to me.
"I'm excited to keep playing with such a great group of players in front of such amazing fans for at least two more years."
Glasgow Warriors Head Coach Dave Rennie said: "Niko has been in outstanding form this season, and we're delighted that he's sticking around.
"We all know what he's capable of on the pitch but off of it he's a key member of the squad, loved by everyone and the club means an awful lot to him and his family."