The unilateral truce, first announced by the rebel Kurdistan Workers Party (PKK) in March, had been due to expire on Wednesday but will now continue until September 1, the separatists said.
The extension was decided in anticipation of a "roadmap for a democratic solution" which jailed PKK leader Abdullah Ocalan is to propose in August, senior PKK commander Murat Karayilan told the pro-Kurdish Firat news agency.
"In order to lay the ground for the roadmap… we have decided to extend the non-action period until September 1," he said. "Within this period, our forces will not take any military action apart from fighting in self-defence that could be forced upon us."
He said the PKK "places great importance on the roadmap and already officially declares that it will stand behind it."
In Diyarbakir, the largest city of the Kurdish-majority southeast, about 25,000 people took to the streets, calling for peace and chanting "Enough is enough," as police enforced tight security measures.
Senior lawmakers from the Kurdish Democratic Society Party (DTP), which organised the march, said the 25-year Kurdish conflict should be resolved on the basis of "democratic autonomy," similar to that of Spain’s Basque region.
The DTP, they said, would unveil in the coming days proposals for a constitutional reform that would guarantee Kurdish rights.
Demonstrators shouted slogans praising Ocalan and brandished portraits of the rebel chieftain, who has been serving a life sentence for treason on a prison island in northwestern Turkey since 1999.
Karayilan charged that Ankara’s declared desire to resolve the conflict lacked "sincerity" and accused the government of seeking to weaken the PKK.
If Ankara "insists on policies of annihilation, I would like to emphasize that our movement is stronger than ever and in a position to defend itself," he said.
Ankara has never formally recognised PKK’s unilateral truces and military operations against the rebels have continued.
The PKK, listed as a terrorist group by Turkey and much of the international community, took up arms for Kurdish self-rule in the southeast in 1984, sparking a conflict that has claimed about 44,000 lives.
In May, President Abdullah Gul urged swift measures to end the conflict, stressing that "increasing democratic standards" was the way to resolve it.
His appeal revived debate on how to proceed on he Kurdish issue amid media speculation that the government may consider fresh steps to win over the Kurdish community and encourage the PKK to lay down arms.
Eager to boost its EU membership bid, Ankara has in recent years granted the Kurds a series of cultural freedoms, but failed to draw up a specific strategy to convince the PKK to end its armed struggle.
The government rules out dialogue with the rebels and has rejected calls to consider a general amnesty.