Cole had looked set to leave Stamford Bridge in the summer, with Paris Saint-Germain widely tipped as a possible destination, but he has now extended his stay in west London.
|13/2||Chelsea are 13/2 with Bet365 to win the Europa League
"I am pleased I will be starting my eighth season at Chelsea," Cole told the club's official website. "I have great memories here and I enjoy coming to training every day. The staff are amazing and I enjoy training with the lads.
"I have been able to fulfil nearly all my ambitions at Chelsea.
"I have won the Champions League, the League, I have won FA Cups here but of course you don't want to stop winning trophies and being at a big club, you are always fighting to win a trophy.
"Being here for seven years and being at Arsenal before that playing for trophies, you never lose that hunger.
"I wanted to stay at Chelsea because we are always fighting and challenging for trophies. That desire and the will to want to win things have not gone."
Chelsea's decision to renew Cole's contract is not thought to have any bearing on fellow veteran Frank Lampard's future, with the midfielder still looking almost certain to leave Stamford Bridge in the summer.