The Ivorian full-back has put pen to paper on a contract which will commit him to the club until 2015, having made 17 appearances in all competitions this season
Demel has been a regular fixture in a Hammers back four which has conceded 28 goals in 22 games since returning to the Premier League, making 17 appearances in all competitions.
And the Ivorian revealed he is happy to cap regular first-team football with a new deal as he looks to put the injury problems of last season behind him.
"It's really good for me and I'm really happy to have a new deal with West Ham," he told the club's official website.
"I've had a good year this season, and even last year was good, despite the fact that I was injured for so long and struggled a bit.
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"Last year was kind of difficult because when I signed, I had pre-season, and then unfortunately I got injured really quickly and it was hard to come back afterwards.
"But right now I feel good. I had a pre-season, we worked hard and I have to thank the medical staff for the job they have done with me.
"I feel good and I'm quite happy with what I'm doing right now, but I know that I can do even more."
Demel says he is now looking forward to Wednesday evening's Premier League clash with Arsenal at the Emirates Stadium, particularly considering he spent a season with the Gunners earlier in his career.
"To play Arsenal, against the big lads and the big teams, for every player, is a good feeling," he added.
"It's a good stadium and I still have some friends over there. It will be special but not too much, because I just spent a year there, so it's not a big deal.
"We're looking for a good result, because we need slowly to get the points in the tank. We're going there to get a result and I'm looking forward to a good game.
"Arsenal have lost many players, really good players and bought some new ones, who, I think need time to adapt.
"The transition is taking a bit of time, but they will be back, they'll be back at that level. Any time would be a good time to get my first West Ham goal, so why not Wednesday?"