The centre-back, who was crucial in the Eagles' successful run in the Championship play-offs, will now remain at the club for upcoming season back in the Premier League
The 33-year-old made 14 appearances for Palace last season, after arriving on a free transfer in September 2012, including a run in the first team for the final seven games of the season as the Eagles clinched promotion spot via the play-offs.
"I'm delighted to carry on playing for Palace for another season," Gabbidon told the club's official website. "I've really enjoyed my time so far as there's a great group of lads here and I can't wait to have another crack at Premier League football playing alongside them.
"The club has amazing supporters and they've been great to me since I joined, and I can't wait to playing against the top teams in the country at Selhurst next season."
The former Wales international has amassed over 350 appearances club appearances for West Brom, Cardiff, West Ham and QPR as well as winning 46 caps for his country.