Motta's existing deal ended in June 2015 and the Brazil-born Italy international moved to the French capital from Inter in January 2012, scoring eight goals in 65 appearances for Laurent Blanc's men.
Confirming the news, the club tweeted: "Paris Saint-Germain is pleased to announce the extension of the contract of Thiago Motta until 2016."
PSG is currently on course to retain the Ligue 1 title - sitting five points clear of closest rival Monaco - and the 31-year-old has started 21 of the team's 25 league matches this season.
Motta told the club's official website: "I'm very happy to pursue my dream with Paris Saint-Germain. I hope to continue to help the club reach their very ambitious goals in France and Europe."
Club owner Nasser Al-Khelaifi expressed his delight at the deal.
"We're very proud to extend with Thiago Motta, an exceptional player on the pitch and elegant off it," he said. "He symbolizes our ambitions."
Blanc's men visit Toulouse in the league on Sunday.