The Spaniard, who also announced his international retirement on Tuesday, had been linked with moves to Al Arabi in Qatar and MLS franchise New York City after enduring a disappointing season with Barcelona last term.
Under Gerardo Martino, Barca won only the Supercopa de Espana last season before the Argentine left his position to be replaced by former player Luis Enrique.
Xavi revealed that his former team-mate helped convince him to stay at Barca, while thanking the club for their patience.
"I thank the club for being so patient and letting me think over my situation over the summer," the 34-year-old one-club man said.
"I'm happy that the club has faith in me and wants me to see out my contract. Having spoken to the coaches, they've made me feel competitive and useful.
"My contract is for two years so nothing changes. I think I made a rash decision to [consider leaving] the club and changed my mind. I wish to apologise and thank everyone."
Xavi was part of the Spain side that saw their defence of the World Cup unravel in Brazil - crashing out at the group stage with just three points.
"The World Cup really upset me and made me feel that things were coming to an end, but I've had an injection of morale," he added.
"I've always been someone who played for the team - I put the team before myself.
"I'm here to play my role for the team. I can't tell you how the season will go. With the trainers, the coach and the signings, I'm feeling very good.
"The changes have been excellent changes and will be good for Barcelona.
"My morale wasn't as high as it should have been [but] the important thing is we are a team. It's like being a kid starting over again. I like Luis being here and I like the staff we've got."
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