The former Italy international, who succeeded Paolo Maldini as Rossoneri skipper in the summer of 2009, has extended his stay at San Siro for a further 12 months
The veteran midfielder, who will turn 35 before the end of the month, had been expected to part company with the Rossoneri but has now put pen to paper on a deal which will keep him at San Siro until June 30, 2012.
Alessandro Nesta, Filippo Inzaghi and Gennaro Gattuso all lined out for Milan for the last time in Sunday's win over Novara and it had been thought that Ambrosini might follow them out the exit door.
However, despite his advancing years, the former Italy international made 22 appearances, and 18 starts, in the league this season.
Ambrosini, who joined the club from Cesena in 1995, was installed as Milan captain two years ago following the retirement of legendary defender Paolo Maldini.