The 30-year-old was released by West Ham at the end of last season, but penned a short-term deal in October following a striker shortage, including a prolonged absence for Andy Carroll with a heel injury.
Cole's contract was due to expire this month, but he has now been rewarded with an extended stay after scoring four goals in 11 Premier League appearances this season.
His latest impact came in Saturday's crucial 2-0 victory at Cardiff City, where he netted the opening goal shortly before half-time as West Ham moved out of the relegation zone.
Cole first arrived at Upton Park from London rivals Chelsea in 2006, and he made an instant impact with a goal on his debut in a 3-1 triumph over Charlton Athletic.
A statement on the club's official website confirmed: "West Ham United are delighted to confirm that Carlton Cole has signed a new 18-month contract with the club.
"The England centre forward has been in fine form since re-joining the Hammers on a short-term contract in October 2013, scoring four Barclays Premier League goals in 11 appearances. In all Cole, who also spent seven seasons at the club between August 2006 and last May, has scored 63 goals in 251 games in claret and blue.
"Cole's impressive performances this term have been rewarded with a new deal and the striker is now set to play an important role for the Hammers during the second half of the season and beyond."
