The 34-year-old was due to see his original deal expire at the end of the month, but the club announced on Tuesday afternoon that the Swiss international has committed to the club once more.
Schar is the second-longest serving player in the current squad under manager Eddie Howe after joining from Spanish side Deportivo La Coruna in July 2018.
Speaking after penning the extension, the defender revealed he is delighted to sign fresh terms which is music to the ears of Newcastle fans.
"I'm really pleased to be staying at the club. I feel like I've achieved a lot in my eight years here, but I believe there is still much more to come.
"I'm proud to call Newcastle home. Everybody knows how happy I am, both in this city and with this club, so I'm very glad to be continuing that for another year.
"Last season didn't end the way I wanted in terms of my injury, but my full focus now is on getting back to fitness and helping the team achieve our goals next season."
Howe delighted to see Schar stay
Howe also commented on the deal, as he looks ahead towards next season where Newcastle will aim to better their 12th place finish last season.
"Fabian has been outstanding since I arrived at the football club so I'm really pleased to see that he'll be staying with us.
"He's a really highly valued member of our squad, not only for his ability on the pitch but also for the leadership and experience he brings to the group.
"Fabian's form was really strong until injury ended his season. His creative distribution, defensive mentality and huge experience was a big miss towards the end of the last campaign. He has worked tirelessly to regain his fitness and we look forward to seeing him back in action next season."