The 40-year-old has won 33 trophies in total, including two Champions Leagues, and has been at the club since 2011. In his 597 matches for Bayern across all competitions he has managed 269 clean sheets.
"FC Bayern has had a number of absolutely exceptional goalkeepers throughout its history – and Manuel Neuer occupies a very special place among them," said club president Herbert Hainer.
"He is the face of not just one, but two generations and a captain who is an outstanding role model both on and off the pitch. We are proud of how he has shaped this club for over a decade."
The keeper and Bayern narrowly missed out on a spot in the Champions League final, losing to holders Paris St Germain in the semi-finals last week. Bayern can still win the domestic double and face VfB Stuttgart in the German Cup final on May 23.
"I took my time with the decision and I'm very happy now," said Neuer. "Everything is right here: We can beat anyone with this team. In our goalkeeping team, we stick together and try to constantly raise the bar, push each other and prepare optimally for the games."
Along with Neuer, reserve keeper Sven Ulreich also agreed a one-year extension.
Neuer was a long-time Germany number one, winning the World Cup in 2014 and retiring from the national team after Euro 2024.
There has, however, been mounting speculation surrounding a possible surprise comeback for Germany at the World Cup next month. Germany coach Julian Nagelsmann is due to announce his squad next week.
