The 30-year-old's new deal ties him to the Rojiblancos until 2017, Atletico announced on their official Twitter account.
The tweet read: "#GABI2017. Great news for all atletico fans. The captain has this morning extended his links with the club until 2017. Congratulations!"
The Madrid-born midfielder came through the youth ranks at Atletico before making his first-team debut in the 2003-2004 season.
He spent the 2004-05 campaign on loan at Getafe before joining Real Zaragoza in 2007.
After four years at Zaragoza, Gabi returned to Atletico and has since helped the club win the Primera Division, the Europa League, the Copa del Rey and reach the final of the UEFA Champions League.
Gabi said: "It's another dream (come true) in my life. I've been thinking about this renewal because I'm really keen to continue making history and helping the team, and I'm very happy."