The 40-year-old goalkeeper’s deal was set to expire in the summer but he will stay on in Munich for what will be a 16th year at the Bavarian giants.
“It was a clear decision after taking some time to reflect,” said Neuer.
“All the conditions are met here: with this team we can beat any opponent,” he said.
Considered among the best in his position in history, Neuer finished third in Ballon d’Or voting in 2014 behind Cristiano Ronaldo and Lionel Messi, the most recent time a goalkeeper made the top three.
German tabloid Bild reported Neuer will play fewer games in the 2026-27 season as he helps facilitate a smooth transition to back-up goalie Jonas Urbig.
Bayern have also extended the contract of third-string goalkeeper Sven Ulreich for a further season.
A 2014 World Cup winner with Germany, Neuer stayed on at Bayern after ending his international career in 2024, winning 124 caps with the four-time world champions.
The veteran was widely lauded for his performance in the first leg of Bayern’s Champions League quarter-final away victory over Real Madrid, winning the UEFA man of the match award.
Neuer has enjoyed a glittering career at Bayern since joining from boyhood side Schalke in 2011.
In addition to two Champions League titles, he has won the Bundesliga a record 13 times – the equal most alongside long-time teammate Thomas Mueller.
Only twice since he arrived at Bayern has Neuer failed to win the Bundesliga: in 2011-12, his first season, and 2023-24.
Neuer has also lifted the German Cup six times in his career – on five occasions with Bayern and once with former club Schalke. (AFP)