The 36-year-old midfielder had been courted by leading clubs across Europe in the months before his initial five-year Galaxy deal ran out in December, with Paris Saint-Germain's wealthy Qatari owners offering the most lucrative deal.
But Beckham turned down around US$12 million per year with the glamorous French capital club for a less lucrative base salary at the Galaxy, which was previously paying him at least $6.5 million annually.
For the former England captain, whose career at Manchester United and Real Madrid turned him into a celebrity who transcended sport, the deal wrapped up on Wednesday in Los Angeles could be the last of his playing career.
"This was an important decision for me," Beckham said in a statement. "I had many offers from clubs from around the world, however, I'm still passionate about playing in America and winning trophies with the Galaxy."
It took until November, though, to collect his first winners' medal in the United States, delivering the Galaxy's first MLS Cup since 2005. It followed Premier League, La Liga and Champions League triumphs during his career in Europe.
Beckham left Europe in 2007, making the surprise decision to join the Galaxy from Real Madrid.
"I've seen first hand how popular soccer is now in the States and I'm as committed as ever to growing the game here," Beckham said. "My family and I are incredibly happy and settled in America and we look forward to spending many more years here."
Beckham's England career has effectively ended after making 115 appearances — the most for an outfield player. But he is targeting a spot in Britain's Olympic football team later this year, with the games being hosted in his native London.
By staying at the Galaxy, Beckham can be confident of a regular starting place in Bruce Arena's team, which might not have been the case at PSG or one of the English Premier League clubs that was pursuing the hottest brand in global football.
The Galaxy, though, knows how close it came to losing the player who has brought an international spotlight on the team after scoring 11 goals in 74 appearances.
"I am thrilled that David has chosen to rejoin the Galaxy, especially as he had numerous options where he could continue his career," Arena said. "I felt that he was one of the best players in all of MLS last season and we could not have achieved the success that we did without him. We look forward to trying to replicate that success this season with David once again in a Galaxy uniform."
It is a jersey that the Galaxy said is the best selling in the MLS and "one of the best in the world." And it will continue to have Beckham's name emblazoned across the back of replica kits in sports shops from the Americas to Australasia.
"There has been much speculation in the past four months on where David was going to play and we did not get caught up in this and remained focused on re-signing him," said Tim Leiweke, president of team owner Anschutz Entertainment Group. "David had many options and we are pleased he felt comfortable, not only with our organization but also with Los Angeles, and will remain an important part of our club, our AEG family and our city."
The talks with Leiweke intensified after Beckham turned down PSG's offer at the start of January, with Beckham represented by manager and business partner, Simon Fuller, the creator of reality TV hit "American Idol."
"When David and I discussed making the move from Real Madrid to the LA Galaxy back in 2007, our minds were firmly focused on the massive opportunity of helping to grow soccer in the United States," Fuller said. "We have made great progress over the past five years in raising the profile of soccer domestically and the MLS on a worldwide stage, and we are encouraged by all the results."
From having 12 teams in 2006, the MLS now boasts a league with 19 sides while nine new football specific grounds have been built during Beckham's first five years.
"Clearly this is an ongoing mission and this new deal confirms our commitment to continuing our journey and making sure the world's biggest sport, soccer, continues to grow in the world's most passionate sports loving nation, the USA," Fuller said.