The 34-year-old's previous deal at Stamford Bridge had been due to expire at the end of the current campaign, but Jose Mourinho always expected his captain to stay into an 18th term in the club's first team.
Speaking on March 3, the Chelsea boss guaranteed Terry would still be part of his plans in 2015-16 and the defender duly agreed terms on Thursday.
The former England international has been in superb form for Chelsea this season, making 40 appearances in all competitions and helping them to win the League Cup earlier this month.
"I'm delighted to have signed an extension to my contract with Chelsea," he told the club's official website.
"After adding another major trophy to my collection this month I hope myself, the players and manager can continue to bring success to our club.
"Playing for this great club makes me so proud. And as always I would like to thank the fans who have continually supported me."
Mourinho was equally delighted to have his defensive stalwart signed on for another year, insisting there was no sentimentality in awarding him a new deal.
"This new contract is not to say 'thank you very much'," said the Portuguese. "It is because John continues to perform. He is a top defender.
"I am happy that he completely deserves this new contract after a season where he has already played 40 matches."
Chelsea sit six points clear at the top of the table with a game in hand, and welcome Stoke City after the international break.
