He was named India's envoy in Washington in September last year ahead of the US presidential election and after serving just eight months as Indian High Commissioner to Britain.
With Mr Sarna as the Ambassador, Prime Minister Narendra Modi had a highly successful first-time meeting with US President Donald Trump in Washington this year.
Both Mr Sarna and his predecessor, Arun Kumar Singh, are former Indian Ambassadors to Israel, underlying the importance of a posting in Tel Aviv which is one of Washington's closest allies.
Mr Sarna has had a previous posting in Washington when he was Minister for Press, Information and Culture between 1998 and 2002.
He was among the longest-serving spokespersons of the ministry between 2002 and 2008. He has also had postings in Moscow, Warsaw, Tehran, Geneva and Thimphu.
This is the second high-level extension this year after Foreign Secretary S Jaishankar's term was also extended by a year. MrJaishankar is set to retire in January 2018, but South Block is speculating whether he would get another extension from PM Modi.