Giggs is the most decorated player in English football, having won 11 league titles, four FA Cups and two Champions League titles, and has played 862 senior games in United's colours, more than any other player who has represented the club.
"All I've ever wanted to do is play for United and I've been lucky enough to do that for 20 years," Giggs told the club website on Friday.
"It's great to know I'm still contributing to the team's success and I feel I've got a lot to offer on and off the pitch."
"This is an exciting time to be involved with so many good young players coming through."
Giggs, who made his United debut in 1991, has spent his entire senior career at Old Trafford.
Manager Sir Alex Ferguson said he had "run out of words" to describe Giggs.
"He is a marvellous player and a wonderful man," he said.
"To have the desire and the ability to play at the top level in such a physically demanding position at his age requires a special person.
"He is still turning in man of the match performances and his experience is so vital for the younger players in the squad."
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