The 50-year-old, who made his name in Swedish club football during a hugely successful seven-year spell at Ostersund before managing Premier League clubs Chelsea and West Ham United, took the Sweden job on a short-term contract in October 2025.
"To be able to continue in this role means a lot to me. I feel both a great pride and a great responsibility," Potter said in a statement published by the SvFF.
"It's a big day for me and a fantastic opportunity to do something important going forward ... Sweden is a football country with a proud history of teams that have made it to the finals of major championships and competed there, which we want to return to."
Sweden, whose poor performance in their World Cup qualifying group under Potter's predecessor Jon Dahl Tomasson led to the Dane's sacking, can still get to the tournament. They take on Ukraine in a playoff in Valencia, Spain, on March 26th.
If Sweden beat Ukraine they will face Poland or Albania in Stockholm on March 31st, with the winners qualifying for the World Cup in the US, Canada and Mexico starting in June.