The 34-year-old England World Cup winner had been linked with a possible coaching role at his former club Bath, but he will now spearhead Irish's return to top-flight European rugby in the European Cup next season.
Former England and British & Irish Lions centre Catt has proved an instrumental figure during Irish's push for the Premiership title this term, with the Exiles already through to a probable play-off clash against Leicester on Sunday week.
"I am enjoying my rugby at Irish," said 65 times-capped Catt, who joined Irish in 2004 and is arguably the form centre in England at present.
"We have started out on a journey as a squad, and I want to be part of seeing where it will take us.
"Helping the club play at the top level in the Guinness Premiership and Heineken Cup will be invaluable experience for me as I position myself for my future in rugby."
Irish rugby director Brian Smith added: "It is very encouraging for the club that we have retained Mike's services for another year.
"He has been pivotal to the success of the team this season. Given the sort of rugby that he is playing for us, it could help his case for selection for an England tour or the next World Cup."