The veteran BVB midfielder has been a huge part of the squad since joining in 2002 and has been rewarded for his performances this season with a one-year extension
The defensive midfielder had helped to guide his side to two successive Bundesliga championships but Bayern Munich have dethroned Jurgen Klopp's men this season in emphatic style.
Kehl's contract was set to run out at the end of this campaign but this one-year extension ensures that he will remain with the Champions League semi-finalists for another 12 months.
The 33-year-old told BVB's official Twitter account: "BVB, our team, the fans and the city of Dortmund have long since become like a piece of home to me."
The former Freiburg and Hannover player has made 233 Bundesliga appearances for BVB, scoring 19 goals in the process since joining in January 2002.
Along with the likes of Mario Gotze, Marco Reus, Ilkay Gundogan and Mats Hummels, Kehl has helped Klopp's side reach the last four of Europe's elite competition, where they will need to overcome Real Madrid to reach the final of the competition.