Fianna Fáil Leader Micheál Martin has said his party will guarantee the Government can continue throughout 2019 and an election may be held early in 2020.
The agreement has kept the minority Government in place since May 2016.
It has seen Fianna Fáil facilitate the passage of three Budgets by the minority administration.
Talks began in October about extending the agreement between Fianna Fáil and Taoiseach Leo Varadkar’s Government.
Mr Martin told the Dáil this afternoon that business as usual was not an option and there must be an ability to put the national interest above party interest.
He said Ireland was in a period of heightened danger over fears created by a hard Brexit and the risk of a no deal outcome had risen dramatically.
Mr Martin told the Dáil that the political chaos we see in London should not be allowed spread to Dublin.
He said that in normal times, an election now would be the right thing for the country.
"However, these are not normal times and Ireland is immediately confronted with one of the biggest threats for many decades," he said.
Addressing the Fine Gael parliamentary party tonight, Taoiseach Leo Varadkar said the Fianna Fáil leader had made the right decision.
He drew comparison to events in the UK and what has played out in Ireland today.
Taoiseach tells his party tonight that Micheál Martin made the right decision to extend the Confidence and Supply Agreement. @rtenews— Mícheál Lehane (@MichealLehane) December 12, 2018
Earlier, Tanáiste Simon Coveney thanked Fianna Fáil and Mr Martin for renewing the agreement, saying that the decision showed maturity.
Speaking to the media this evening, he said he expected the extension of the agreement to go "well into 2020".
He said it was not a free pass for Government but an extension of the existing agreement.
Mr Coveney said they had reviewed the existing agreement "very thoroughly" and that document continued to be the basis for the agreement.
He said Fianna Fáil had produced a number of pieces of legislation that they wanted to be proceed with and he would work with them on this.
He said they would also have to work with them on emergency legislation regarding contingency planning for Brexit in the New Year.
He added that the "real story" was the two parties working together to ensure they are ready for Brexit.
Mr Coveney said it was a mature and sensible decision, and not as a result of any threat from Fine Gael.
Sinn Féin Leader Mary Lou McDonald described as "astonishing" that "even by Micheál Martin's dithering standards", it took nine weeks to establish that the Government had failed in housing.
Ms McDonald offered her party's "services" to speed up any future reviews saying she could have spared the melodrama and the pretence of critical tension between "Tweedledumb and Tweedledee".
Ms McDonald said it seemed that the Tories' difficulties were Fianna Fáil's opportunity "to run away again from the Irish electorate" and "deliver more of the same" failure and homelessness.
She accused Fianna Fáil of crying crocodile tears.
"Bravo Micheál Martin. Well done. That's some class kind of stability as described by the Soldiers of Destiny," she said.