The midfielder's contract was due to expire in the summer, but the 39-year-old has committed to the club until June 2014.
The new deal will take Giggs into his 23rd season as a first-team player.
Since making his debut in 1991, the United winger has gone on to become the most decorated player ever, winning 12 Premier League titles, four FA Cups, three League Cups, two UEFA Champions Leagues, one Super Cup, an intercontinental Cup and a FIFA Club World Cup.
The Welshman is also Manchester United's record appearance maker with 931 appearances for the Red Devils, scoring 168 goals.
And Sir Alex Ferguson paid tribute to Giggs, hailing him as a "marvellous player".
Ferguson said: "What can I say about Ryan that hasn't already been said? He is a marvellous player and an exceptional human being. Ryan is an example to us all, the way in which he has, and continues to, look after himself.
"He has fantastic energy for the game and it is wonderful to see. Ryan seems to reach a new milestone every week and to think that he now has 23 unbroken years of league goals behind him is truly amazing in the modern-day game.
"His form this year shows his ability and his enjoyment of the game are as strong as ever and I am absolutely delighted that he has signed a new contract."
Giggs is expected to follow Paul Scholes into a coaching role when he retires, and Ferguson confirmed that the former-Wales captain is set to take up a position at Old Trafford once his playing days are over.
Speaking to reporters, Ferguson said: "That will happen. We've done the same with Nicky Butt and Scholes will do exactly the same when he finishes."
Giggs is in line to make his 1000th senior appearance - including fixtures for United, Wales and Team GB - when Ferguson's side take on Norwich at Old Trafford on Saturday.
In fact, Saturday's match marks 22 years to the day since Giggs's debut in 1991.