Twice a winner of the Chelsea Players' Player of the Year award, Cole is still considered one of the world's best left-backs and his retention could go some way to appeasing fans upset at the likely departure of midfielder Frank Lampard come the end of the season.
Cole said: "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."