The 33-year-old central defender has made 47 appearances this season. He captained 490 times during his 16-year senior career with Chelsea and has scored 57 goals in 621 appearances for the Premier League club.
Terry said on the club’s official website: “I’m delighted to have signed an extension to my contract with Chelsea taking me into my 20th year with the club.”
“I’d like to thank the fans and club for their continued support, and the manager who was instrumental for me the last season.”
The former England international has won three Premier League titles, five FA Cups, two League Cups, the Champions League and the Europa League.
Terry’s next season will be his 17th senior campaign with Chelsea.