The 33-year-old is now tied to the reigning Bundesliga champions until the summer of 2014.
Kehl has already given 11 years of loyal service to Dortmund and the former Germany international is delighted to have extended his stay.
He told the club's official website: "Borussia Dortmund, our club, the supporters and the city of Dortmund have grown to be a home for me.
"I am delighted to be part of this fantastic club until 2014.
"I am proud to help continue the success of this squad as skipper."
Dortmund's general manager Michael Zorc added: "We are happy to have signed on with a real leader and a key figure in our first team squad."