The 37-year-old won the Champions League, three Premier League titles and seven FA cups during his time in London.
Cole joined the Galaxy from Italian giants Roma in 2016 and played 29 times last season.
Speaking on Cole, who earned 107 caps for England, Galaxy head coach Sigi Schmid was delighted to keephis illustrious defender on the west coast.
"We are very excited that Ashley will be returning for us in 2018," said Schmid.
"He has been a tremendous leader for our club.
"He has shown he can be successful in this league and we are confident that will continue in the season ahead."