The Argentine right back has played an integral role in Manuel Pellegrini's squad and also captained the side four times this season.
"I'm enjoying my time at West Ham and I've got so much respect and so much passion for this profession," Zabaleta said in a club statement.
"I'm still enjoying it and it's made me feel I can go for another year.
"I just want to focus on what we're doing with the club and with the team this season and be ready to go again next season, because I just want to enjoy every single moment."
Zabaleta won two Premier League titles, two League Cups and the FA Cup during his time at City, following spells with San Lorenzo in Argentina and Espanyol in Spain.
(Reporting by Hardik Vyas in Bengaluru; Editing by Toby Davis)
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