The veteran coach, 66, had recently been linked with the position of head coach at Paris Saint-Germain, as the Ligue 1 giants seemingly prepare for life after Real Madrid-bound Carlo Ancelotti, but Hiddink will continue with the ambitious Russian outfit instead.
"Both sides exercise the old contract's option to their mutual satisfaction. I am glad," Anzhi board director Konstantin Remchyukov announced via Twitter.
Hiddink announced back in November 2012 that he would retire as coach at the end of the 2012-13 campaign, but he has now seemingly changed his mind after guiding Anzhi to third place in the table.
The Dutchman has been in charge of the Dagestan side since February 2012 and has seen players such as Lassana Diarra and Willian join him at Anzhi as the club continues to splash the cash in search of silverware.