The 34-year-old, still dubbed a "key player" by Michael Zorc, will remain with Jurgen Klopp's team for one more year and insists it will be his final one in the German league
The 34-year-old is now under contract until June 30 next year, having joined Dortmund from Freiburg in 2001 and clinched three Bundesliga titles in his time at Signal Iduna Park.
Former Germany international Kehl, also a winner of the German Super Cup and DFB-Pokal, has revealed he plans to retire when his new deal comes to an end.
"Borussia Dortmund, our wonderful team, the fans and the city of Dortmund have been my home for many years," he told the club's official website.
"I am looking forward to my last year in the Bundesliga. Then it is the right time for a new chapter in my life."
The club's sporting director, Michael Zorc, is happy that Kehl plans to end his playing career with Dortmund.
"Sebastian is a major key player, he has a huge wealth of experience," Zorc added.
"We are very happy that he is with us until 2015 and will end his impressive career in the Dortmund shirt."
Kehl has helped Dortmund to second in the Bundesliga this season as well as the latter stages of the DFB-Pokal and Champions League.
He scored in Europe's premier club competition for the first time in midweek – registering Dortmund's only goal in their second-leg defeat to Zenit.