Signed last September in the most lucrative deal in Australian sport, the 38-year-old striker has had the impact both on and off the field that the A-League club banked A$2 million ($2.06 million) a year on.
Despite reported interest from clubs in Brazil and the United States, Del Piero said there had never been any real doubt that he would stay on.
"I am very happy to be staying at Sydney FC for another season," he said.
"I have always said I want to continue that for next season but first we must work hard for success on the field for the rest of this season."
Del Piero's 11 goals in 18 games have just been the icing on the cake for Sydney FC as the quality of the World Cup winner's performances have helped haul the club from a miserable start to the season and into the playoff hunt.
His mere presence in the A-League has also generated huge media and fan interest in soccer, which sometimes struggles for profile in comparison to Australia's dominant football codes of rugby league and Australian Rules.
"Alessandro's arrival at Sydney FC has been a wonderful success for Sydney FC and the A-League both domestically and internationally," said club chairman Scott Barlow.
"We look forward to working together with Alessandro to increase the profile of Sydney FC and football in Australia as we strive for success on the pitch for the remainder of this season and next."
Twice champions Sydney travel to Melbourne Heart on Saturday for a match both sides need a win to stay in the race for the playoffs.
The postseason looked like a pipe dream for Sydney FC in December when the team were bottom of the 10-team league but a 7-1 win over Wellington Phoenix, in which Del Piero scored four goals, sparked a resurgence.
($1 = 0.9718 Australian dollars)