The 20-year old, who impressed for Italy at this summer's European Under 21 Championship, had previously been linked with a return to Serie A, as well as a move to Manchester United.
However, Verratti has now brought an end to the speculation surrounding his future by signing a new deal.
"Paris Saint-Germain are very pleased to announce that Marco Verratti has extended his contract for another year. He is therefore bound to the club until June 2018," read a statement on the club's official website.
"Arriving at Paris Saint-Germain in 2012, Marco Verratti has shown his desire to impress in his time with the club. The young Italy international has played 36 games, including nine in the Champions League last season.
"The extension shows the will of the Paris Saint-Germain to build a project for the future and to build one of the greatest teams in Europe."