Sanchez, 32, arrived at Coopers Stadium ahead of the 2014-15 campaign and has scored seven goals in 23 league matches played.
Securing the services of the former Cadiz and Recreativo player will see the strong Hispanic influence continue at the South Australian side, where Catalan coach Josep Gombau has assembled a squad containing fellow Spaniards Isaias, Sergio Cirio and Miguel Palanca. Gombau also inherited a key Latin American player in Argentine playmaker Marcelo Carrusca.
"Pablo has had a very good season and we are happy to have him here with us for the next season,” the head coach said in a statement.
"He is a versatile player that can play in different positions and can score goals as well. He is also a very respected team-mate and adds a lot of value to the playing group.
"So for all of these reasons we are very pleased that he has signed again."
Sanchez meanwhile, having won the inaugural FFA Cup and with finals football just a week away, was delighted to commit his future to the club.
"I have played a good season and the club wanted to re-sign me," he said.
"I have also been part of the good football that we are playing and I am happy for this.
"When I first signed I expected good things, but the feeling once I came to Adelaide is better than what I could have ever expected.
"The fans are amazing and have always supported the team this season."