The 33-year-old has played 727 matches, including his debut for the club in March 1991 against Everton. Only Sir Bobby Charlton (759) has played more games for the club.
Giggs said: "I am enjoying football more than ever and I hope to carry on playing football for Manchester United for as long as I can.
"I would like to thank Sir Alex Ferguson, the fans and everyone at the club for the great support I have received over the years."
The former Welsh international has scored 141 goals and won 18 major titles in his time at Old Trafford, including nine Premier League titles, four FA Cups, two League Cups and one European Cup.
Ferguson himself said: "I am absolutely delighted that Ryan has signed for a further season.
"He epitomises the word loyalty - he signed here as a 14-year-old school boy and is still with the club 20 years on.
"Apart from his playing ability he has a fantastic demeanour and is a great role model to the younger players.
"I am sure he will be at the club for a long time to come."