The 31-year-old former Liverpool frontman, a peripheral player at Old Trafford, had been out of contract this month.
"It's unfortunate Michael didn't get more opportunities but the form of Chicharito (Javier Hernandez) put everyone in the shade and his partnership with (Wayne) Rooney proved invaluable," manager Sir Alex Ferguson said on the club's website.
"I am delighted Michael is staying for a further year and we will look to give him more opportunities in the new season."
Owen joined United two years ago in a surprise move on a free transfer from Newcastle United and has struggled with injuries. He has made 48 United appearances, most of them off the bench, and scored 14 goals.
He was named as one of the substitutes for United's Champions League Final defeat by Barcelona on Saturday ahead of this season's leading scorer Dimitar Berbatov but did not get on the pitch.
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