The Spurs didn't disclose the terms but Yahoo! Sports reported it was a three-year deal worth about $34 million.
"Tim Duncan has established himself as one of the best players in NBA history," Spurs Coach Gregg Popovich said. "His impact on the Spurs organization and the city of San Antonio can't be measured. We are all grateful for the leadership and dedication Tim has shown to the Spurs franchise. He is an unselfish superstar who loves to compete and has only one goal when he steps on the court -- to do whatever it takes to help his team win. We are all thrilled that he'll spend his entire career as a San Antonio Spur."
The 36-year-old, two-time NBA MVP has been with San Antonio since the team made him the No. 1 overall in the 1997 draft.
He averaged 15.4 points and 9.0 rebounds in 58 games last season.
The 13-time All-Star has averaged 20.3 points and 11.3 rebounds for his career, helping the Spurs to four NBA titles.
Duncan is the team's all-time leader in games played (1,111), points (22,258), field goals made (8,717) and attempted (17,192) and rebounds (12,533).