The 36-year-old former Real Madrid player was linked with a move away from Portugal after helping the club win the Primeira Liga.
Casillas told Porto’s official website: “I’m very happy to be here for another year.
“It is fantastic to be linked to a club and a fantastic city, which from the very first day welcomed me very well.
“There were rumours that I could leave, but my intention was always to continue. Fortunately I was able to continue and I’m happy for that.”