Bairns boss John Hughes said he was delighted Barr had opted to pledge his future to Falkirk.
"He is a product of the Academy and epitomises everything that we are about," he told the club website.
Barr said he was determined to improve after completing his first full season in the first team, adding: "I'm happy at Falkirk and always have been."
Barr made his Falkirk debut in 2004.