The decision came after security forces conceded that they had not been able to stamp out the separatist rebels yet.
Human rights groups had been pressing for an end to the military offensive, that has already cost 1300 lives since May.
"The government has decided to extend the deadline for martial law for Aceh for six more months," Chief Security Minister Susilo Bambang Yudhoyono said on Thursday.
The minister was speaking to journalists after a cabinet meeting chaired by President Megawati Sukarnoputri.
Martial law in Aceh on the northern tip of Sumatra islands would have ended on 19 November.
Yudhoyono said the situation in Aceh would be reviewed every month and the state of emergency could be shortened or extended accordingly.
"The government has decided to extend the deadline for martial law for Aceh for six more months"
Susilo Bambang Yudhoyono
Chief Security Minister
The extension of martial law is, however, an admission of stubborn resistance the army is facing from the separatist rebels of the Free Aceh Movement (GAM).
The army claims to have killed more than 900 separatists since May, but rights groups say many civilians are among the dead.
Aceh has been raked by violence since the demand for its independence from Indonesian rule first erupted in 1976.
The resultant conflict has killed more than 10,000 people so far.
The latest round of military offensive by Jakarta came after peace talks with the separatists broke down.
Ishak Daud, a GAM field commander has meanwhile vowed to "fight to the end until we reach our goal of an independent Aceh."