Taylor was fourth in the CFL with 1,583 combined return yards in 2012 despite missing seven games with a knee injury.
He returned 44 punts for 484 yards, 44 kickoffs for 900 yards and four missed field goals for 199 yards and one touchdown. The 27-year-old native of Fort Lauderdale, Fla., also had nine catches for 88 yards and two touchdowns and six rushes for 32 yards.
Taylor has 6,710 combined yards and six touchdowns on returns in 60 career regular-season games.
"Larry is an exciting player and he has been a tremendous asset for us on special teams since he joined the Stampeders in 2011," said Stampeders head coach and general manager John Hufnagel. "His contributions on offence are also very valuable and I'm pleased that he has agreed to continue his career here."
Taylor signed with the Stampeders as a free agent on Feb. 14, 2011, after starting his career in 2008 with the Montreal Alouettes. He was the CFL's special teams player of the year in 2009 and has played in eight playoff games — including three Grey Cup contests — during his career.