The 33-year-old has been at Welford Road since 1997 and has won an incredible seven English titles, two Heineken Cup crowns and an Anglo-Welsh Cup with the Tigers.
"I've been here a long time and it shows how much Tigers is a part of my rugby life that I am extending my contract here again," said Murphy.
"I count myself very fortunate to have played in so many great teams at Leicester and to be able to run out in front of our incredible supporters at Welford Road.
"As defending Guinness Premiership Champions, we are obviously there to be shot at again, but we'll be looking forward to the challenge when we return for pre-season."
Murphy is just one game shy of 250 starts for Leicester and has scored 88 tries and 660 points in his 13 years at the club.
Hugely respected by players, coaches and fans alike in Leicester, the charismatic Irishman is now part of the furniture in England's most-successful side.
"We're delighted that Geordan has agreed a new deal with the club. He is a world-class player and he sets a superb example as a player, both on and off the field," said Leicester head coach Richard Cockerill.
"He's our longest-serving player now and he's certainly been adopted by the supporters as one of their own.
"I don't think he's ever really contemplated playing anywhere else and he still has so much to offer the game as a whole and Leicester Tigers in particular."
Murphy was a Lion in New Zealand five years ago, winning Test caps in the second and third internationals against the All Blacks.
He returned to New Zealand this summer, skippering Ireland in their narrow defeat to the New Zealand Maori a fortnight ago.