By Pilar Suarez in Barcelona
The veteran midfielder had in June indicated his preference to leave Camp Nou after failing to receive assurances from new boss Luis Enrique on how much playing time he would receive.
But after mulling over offers from Qatari club Al-Arabi and new MLS franchise New York City, he has decided to extend his spell in Catalunya.
The news will be welcomed by club chiefs, who are keen for the 34-year-old to remain and share his extensive experience with the club’s younger players.
The situation could have been different, however, had Xavi received more attractive offers. But, having initially been intrigued by the financial rewards available in the Middle East, he cooled on the idea of moving to Qatar and instructed his agent to explore other proposals.
New York stepped forward - indeed they still have a deal on the table - but failed to convince the player it was the right move at this stage of his career.
It means Xavi is set to be a member of the Barcelona squad which attempts to reclaim the title from Atletico Madrid in 2014-15.
He will join new signing Ivan Rakitic, Sergio Busquets and Andres Iniesta as central midfield options with youngster Sergi Roberto also expected to play a more prominent role next season following the departure of Cesc Fabregas - widely touted as Xavi’s replacement when he joined from Arsenal in 2011 - to Chelsea.
Xavi has appeared in over 700 competitive matches for Barcelona and won 22 trophies with the Catalan club.