The experienced Republic of Ireland international, 34, is now tied to the west London club until the summer of 2014.
"I've loved my time at Fulham since I joined the club more than three years ago, so I'm really happy that I am going to stay here for a further year," Duff told the club's official website.
"With 12 matches remaining this season, a top-10 finish is still possible and would represent another good season for the club as we aim to play in the Barclays Premier League for a 13th consecutive campaign.
"I will always give 100 per cent for the chairman and the club, and I look forward to another season playing at Craven Cottage, which really is a special ground."
Duff arrived at Fulham from Newcastle in 2009 for an undisclosed fee - reuniting with now-England boss Roy Hodgson, who was his manager during his formative years at Blackburn.
He has two Premier League titles to his name having been part of Jose Mourinho's Chelsea side and made the UEFA Team of the Year in 2002.
Fulham manager Martin Jol faces a busy spring if he is to keep his squad together, with no fewer than 11 players due to end their current deals in the summer.