With the Bundesliga outfit relegated last year, the 30-year-old arrived at Craven Cottage on a season-long loan in July.
And it has been announced that Riether has agreed a new deal with Martin Jol's side on Thursday, for an undisclosed fee.
After an impressive first season in the Premier League, the Germany international has been invaluable for the Cottagers.
Claiming the full back spot as his own despite pressure from Chris Baird and Stanislav Manolev, Riether's signing will come as a relief to Fulham fans.
On leaving Cologne, he said: "Thanks to the FC. The club and the city have grown on me during my time in the Cologne.
"I am pleased after a first season in England and am focused on my other tasks in Fulham. I wish FC Cologne only the best and the imminent promotion to the Bundesliga."