Gundogan has failed to feature for Dortmund since August because of a back injury but that did not stop the Bundesliga outfit from tying him down for the next two years.
"We are very pleased with this deal against the backdrop of the injury-related situation and hope that Ilkay will contribute his full potential in the coming season for BVB,” Dortmund sporting director Michael Zorc told the club’s official website.
Former Bochum and Nurnberg youngster Gundogan added: "I am very grateful that my club has given me the opportunity to continue to be part of this special team and this very special environment.
"I will do everything to help my colleagues again soon and I am very optimistic about the coming weeks and months."
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