The 35-year-old scored 10 goals in just 17 Bundesliga appearances last season, averaging one every 68 and a half minutes.
The Peruvian is the Bundesliga's ninth most prolific goalscorer of all time, and the most potent overseas player ever to have played in German football with a total of 176 strikes.
"Claudio proved once again this season how big a goalscoring threat he is, and how important he is for the team," said Bayern's chairman Karl-Heinz Rummenigge.
"We're delighted we can continue to count on him and his performances."
Pizarro rejoined Bayern in the summer of 2012 from Werder Bremen, where he also played for two spells, winning the DFB-Pokal with the northern Germany side in 2009.
He has won the Bundesliga five times with Bayern and was a Champions League winner with the Bavarians last season.
"I am very proud to be able to play for FC Bayern again next year," Pizarro said. "There is no better club in the world for me."
The former Chelsea forward has spent most of his career in Germany, lifting the DFB-Pokal five times, the Club World Cup twice and the UEFA Super Cup once with Bayern.