The versatile 26-year old Swedish winger has penned a one-year extension with the Ewood Park outfit after initially joining from Halmstads BK in January 2012.
Rovers boss Gary Bowyer said he was thrilled to have retained Olsson who has featured in 49 matches since his arrival in Lancashire.
"I'm delighted that he has re-signed for another year," the Rovers manager told the club's official website.
"He has had to wait a long time due to the performances of Tommy Spurr, but the level of displays that he put in at the end of the season against Birmingham, Charlton and Wigan show what a valuable member of the squad he is."
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