Tremmel will compete with Lukasz Fabianski and summer signing Kristoffer Nordfeldt to nail down a starting berth in Gary Monk's squad.
"It's fantastic to be back at Swansea -- this is where I want to be," the German goalkeeper told the club's website (www.swanseacity.net).
"I had other options from top-flight clubs in Germany and England, but Swansea is my environment with my people.
"I've experienced the biggest achievement of my career here in winning the cup, and seeing the club continue to progress is really pleasing for me to see."
Tremmel stayed in Swansea after his contract expired, initially training with the under-21 side before rejoining Garry Monk's senior squad.
"It was really nice of the club to allow me to train with the under-21s and then the first team despite me not having signed a contract," he said.
The keeper is considering taking his coaching badges after he retires from football.
"I have always said that I wanted to continue playing until I was 38, and then I would consider what I would do next," he added. "This contract will take me up to that age and I'll see what happens then.
"Taking my coaching badges is something I am interested in, but for now I'm fully focussed on my playing career and doing my best for the first team."
(Reporting by Simon Jennings in Bengaluru; editing by Sudipto Ganguly)
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