Boughner took over for Peter DeBoer last December and led the team to a 14-20-3 record after the squad posted a 15-16-2 mark under DeBoer.
"Bob did a tremendous job last season, getting our group back to playing with an identity and structure that we need in order to be successful," general manager Doug Wilson said. "We saw a marked improvement in our play in several key areas during the second half of the season, before losing some key players to injury."
Erik Karlsson, Tomas Hertl and Logan Couture were among those who missed significant time because of injury.
The Sharks finished last in the Pacific Division with 63 points in 70 games, the third-fewest in the NHL, but there is still upside on a roster led by Timo Meier and top veterans like Evander Kane and Brent Burns.
Boughner will hope to get the most out of the squad while drawing on his extensive experience in the NHL.
The 49-year-old played 10 seasons in the league as a defenseman, appearing for six different organizations. He then began his coaching career with the Windsor Spitfires of the Ontario Hockey League, spending eight years as the head coach. He also served as an assistant with the Columbus Blue Jackets in 2010-11 and the Sharks from 2015 to 2017.
He then spent two years as head coach of the Florida Panthers, producing an 80-62-22 record and failing to reach the playoffs in either season. He returned to San Jose as an assistant in May 2019.
As the Sharks head coach, he'll look to turn the team back into a contender in the Western Conference.
Rocky Thompson will work as the associate coach while three-time Stanley Cup champion John Madden will be an assistant coach.