The 35-year-old had revealed in January that the club had not offered him a new contract - although Chelsea's position changed when they made contact with Terry and his agent prior to the final game of the Premier League season.
The defender, who had been offered a huge contract to move to China, was unsure of his future even after the 1-1 draw with Leicester on the final day, telling Chelsea's fans during an on-pitch address that he had told the club he wanted to stay although nothing had been resolved.
A vastly reduced first-team role and a salary of just £60,000 per week, when he had been offered five times that in China, were thought to be major sticking points. But now Terry will enter his 22nd year with Chelsea after the new deal was confirmed.
Terry said: "I am delighted to sign a new contract with the club. Everyone knows I'm Chelsea through and" I am looking forward to next season under the new manager and hopefully we can make it a successful one. Also, a special mention to the fans for their continued support. You’re the best in the world."
Antonio Conte was central to the decision, according to Chelsea, after discussions between the incoming coach, Terry, Roman Abramovich and the club's board.
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