Valencia, 31, played 43 games in all competitions for United this season and captained the side in their Europa League final victory against Ajax.
The Ecuador international joined the Old Trafford club from Wigan in 2009.
“I am absolutely delighted to have signed a new contract,” he said.
“Manchester United has been my life since 2009. I would like to thank the manager for the confidence he has given me this season and I am sure that we will be challenging on all fronts next season.”
United only triggered a one-year extension to Valencia’s contract in January, at the time committing him to the club until 2018.