The striker extended his deal at the end of last season and has decided to continue his spell with the Serie A club until the end of the 2021-22 campaign.
The Sweden international previously spent two seasons with Milan from 2010-2012, where he won the league title.
The striker returned to San Siro in December 2019 on a free transfer after leaving LA Galaxy.
During his first season back at the club, Ibrahimovic's goals helped Milan secure a Europa League place for the 2020-21 season.
He also became the oldest player to score at least 10 goals in a single league campaign.
Ibrahimovic has once again impressed this season, contributing with 17 goals in all competitions and helping second-placed Milan push for the title against leaders Inter Milan. The Rossoneri are on course to qualify for the Champions League for the first time since 2014.