The 46-year-old, who won the Serie A title in his first season in Italian football, agreed a three-year deal when he first joined the club in June 2008.Mourinho had said there was a "0.01%" chance of him leaving the club after reports linking him with the Real Madrid hotseat this week.
But his decision to sign a new deal seems to have ended any chance of him joining the Spanish giants.
In a statement on the club's official website, the Nerazzurri said the former Porto and Chelsea coach had expressed a wish to "continue the project" that had already been started.
"It is a sign of attachment to the club and a spirit to win," added the statement.
The Portuguese said on Saturday that "little things" were needed to make him stay at the San Siro, hinting at a desire to strengthen his squad after an early exit from the UEFA Champions League this season.
Inter have won the Scudetto for the last four seasons, but have struggled to make an impact in Europe with defeat by Manchester United in the first knockout stage in March marking their latest failure.
Mourinho promised the fans more titles would be on the way shortly after celebrating his first Scudetto last week.
When asked about the chance he could leave Inter, Mourinho said: "There is still a 0.01% chance. But for me this is not an important number, it just means that I am closer to Inter than to Real.
"I am satisfied with the relationship with the fans and with my players. I repeat, I am closer to staying at Inter than going elsewhere."
The comments appeared to irk Inter president Massimo Moratti, who earlier today said: "I am following the matter and we will get to the bottom of it. That's all.
"Am I a bit annoyed? Well, I am not very happy to read some of these things."
But any differences now appear to have been ironed out with Mourinho adding another year to his stay at the club.
Source: Various
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