The judges said they were reluctant to extend the deadline, but were doing so because the state has now proposed a plan for a long-term, sustainable solution to overcrowding.
"Resolving the conditions in California prisons for the long run, and not merely for the next few months, is of paramount importance to this court as well as to the people of this state," the panel said.
The court order was made in two long-running civil rights lawsuits in which the judges had previously ruled that the only way to correct constitutionally inadequate medical care in the prison system was to reduce the number of inmates.
The deadline is now Feb. 28, 2016, for the state to reduce the population of its 34 adult prisons to 137.5% of the capacity they were designed to hold.
Corrections and Rehabilitation Department spokesman Jeffrey Callison said that would require a reduction of 5,470 inmates from the current population of 117,634.
The inmate numbers were previously reduced by about 25,000 as a result of the state's realignment policy, which shifts low-level offenders to county jails.
The extension comes with strict conditions agreed to by state officials. The administration, which has repeatedly appealed orders by the three-judge panel in the past, agreed not to appeal further or to seek additional extensions, according to Monday's order.
The court will appoint a compliance officer, and if benchmarks for reducing the population are not met, the officer will have the power to order the release of prisoners.
The state also agreed to increase credits for non-violent, second-strike offenders, expand parole for elderly and medically infirm inmates, and consider establishing a commission to recommend sentencing law reforms.
The state was also ordered not to send more than the current number of 8,900 inmates to out-of-state prisons.
Brown issued a statement Monday saying, "It is encouraging that the three-judge court has agreed to a two-year extension.
"The state now has the time and resources necessary to help inmates become productive members of society and make our communities safer," the governor said.