Financial terms of the deal were not disclosed.
Rockets owner Leslie Alexander announced the deal, which will continue one of the longest executive tenures in the sport. Dawson is in his 25th season with the Rockets and ninth as general manager.
"C.D. has been very loyal to the Rockets organization over the past 25 years," Alexander said. "It is great for our
organization to have someone of his experience when it comes to dealing in league matters. We signed him to a multiyear extension in order to ensure he remains a member of the Rockets family for years to come."
In addition to having the final say on all personnel matters, Dawson also manages the team's scouting department.
This summer, Dawson reshaped the franchise by obtaining two-time NBA scoring champion McGrady from Orlando in a multiplayer deal that included Francis and Mobley. In Yao and McGrady, Houston has two players under 26 that have combined for eight All-Star appearances.
Dawson was a Rockets' assistant under Del Harris from 1980-83, Bill Fitch from 1983-88, Don Chaney from 1988-92 and Rudy Tomjanovich from 1992-96. He holds the distinction of being the only person to be on the coaching staffs of all four Houston teams that reached the NBA Finals.