The midfielder, 27, is Rangers' longest-serving player having joined from Argentinian side Instituto de Cordoba in July 2009 and has made 130 appearances, scoring five goals.
Faurlin told the club's official website: "It's nice to sign the new deal. It took a little bit of time, but I am so happy everything is now sorted.
"It's been quite an amazing journey so far - relegation, promotions and plenty more - but it's been a beautiful experience. I hope the next chapter is the most epic yet."
Faurlin missed the second half of last season and the club's successful promotion campaign with a cruciate ligament injury and is desperate to return to action in the top flight.
"I was disappointed to miss the second half of last season due to injury, but I'm feeling great now and looking forward to returning to pre-season training next week," he said.
"The Premier League is where every player wants to play and I am no different. We all know that the Premier League will be very difficult, with so many great teams, but we are looking forward to the challenge ahead."