The Benin international, who joined the Black Cats from Paris Saint-Germain in January 2011, had been linked with a move away from Wearside earlier this summer but has committed himself to the club until 2015.
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The attacker has only appeared twice for Martin O'Neill's side this season after picking up an ankle injury against Arsenal on the opening day of the season but is expected to be fit to face Swansea City on Saturday.
O'Neill is delighted the 28-year-old has committed his future to the Black Cats, and feels the signings of Steven Fletcher and Adam Johnson may have convinced him to stay.
"I'm very pleased that Stephane has extended his contract," he told the club's official website.
"Maybe in the light of some of the players who've come into the football club just recently, he might have had a look at that, I don't know.
"I'm just very, very pleased Stephane has signed because he is a very talented player. We're delighted to keep him."
O'Neill admitted he is pleased with the options he now has at his disposal, and his hopeful his new strikeforce can deliver this season.
"That's great, of course," O’Neill added. "It gives us a few options, and if they can stay clear of injuries then they can really progress."