The Belgium international's remains to 2027, but has been improved and also includes a 12 month option.
Sels told the Forest website: "I’m really happy. We had an amazing season last year and I was one small part of that, so I’m really happy to sign a new contract.
“Hopefully we can continue together and have some great moments again this season.
“I’m looking forward to playing in Europe because it’s really something special. Playing in this stadium and playing in big games in the Premier League is also really special."
Chief Football Officer, Ross Wilson, said: “Matz is an experienced goalkeeper who has been consistently performing at a high level for a number of years. He made a big impact on the team last season and is an important part of our group.”
“He has earned the new deal, and we’re excited to see how he keeps improving and helping the team moving forward.”