The new five-year deal will keep the Frenchman at the club until the summer of 2015.
The 27-year-old has recently been linked with Manchester City, Chelsea, Real Madrid and Barcelona.
Ribery said: “I am very happy to have decided to stay with FC Bayern.
“My family and I are very happy to be staying in Munich. This club has become a big family for me.”
Bayern Munich chairman Karl-Heinz Rummenigge said: “We are very pleased that one of the best players in the world has agreed to a contract extension. This is also a sign of the great objectives of FC Bayern in the coming years.”
