The 34-year-old Terry remains one of Chelsea's most consistent and influential players, helping Jose Mourinho's team establish a six-point lead at the top of the English Premier League.
"This new contract is not to say, 'Thank you very much,'" Mourinho said on Thursday. "It is because John continues to perform. He is a top defender."
Terry, who has spent his entire career at Chelsea, has made 661 appearances since 1998, and won a 13th major honour in the League Cup final this month.
"After adding another major trophy to my collection this month I hope myself, the players, and manager can continue to bring success to our club," Terry said. "Playing for this great club makes me so proud. And, as always, I would like to thank the fans who have continually supported me."