Uncertainty over the England international's Stamford Bridge future had alerted a number of big clubs but the 32-year-old said he wants to win more silverware in West London.
"I am pleased I will be starting my eighth season at Chelsea," Cole told Chelsea's website.
"I have great memories here and I enjoy coming to training every day. I have been able to fulfil nearly all my ambitions at Chelsea. I have won the Champions League, the League, I have won FA Cups here but of course you don't want to stop winning trophies and being at a big club.
"I wanted to stay at Chelsea because we are always fighting and challenging for trophies. That desire and the will to want to win things have not gone."
Media reports had linked former Arsenal player Cole with possible moves to Real Madrid and Paris Saint-Germain though interim manager Rafael Benitez said on Sunday the defender had agreed a new deal.
The future of midfielder Frank Lampard, another of Chelsea's old guard, is still unclear with Benitez non-committal on whether he will be offered a new contract at Stamford Bridge when his deal expires in the summer.
