The team has until the end of the month to decide whether to do the same with center Alexis Ajinca.
Augustin, the ninth pick in the 2008 draft, averaged 11.8 points and 3.5 assists last season. He led NBA rookies by shooting 89 percent from the foul line.
Augustin will make $2.1 million next season. Charlotte also has an option for a fourth season.
Bobcats coach Larry Brown was pleased to learn of the team's decision.
"It's a no-brainer," Brown said before Tuesday night's preseason game in Cleveland. "He had a great year. He's a great kid and he's only going to get better."
The 7-foot Ajinca was the 20th pick last year but played sparingly as a rookie. Brown was critical of him before training camp, and general manager Rod Higgins said Tuesday "we'd like to see how it goes in the preseason" before making a decision.