The 39-year-old winger's deal will tie him to the Old Trafford club until June 2014 and complete his 23rd season as a first-team player.
Former Wales skipper Giggs made his United debut on 2 March 1991 and has scored 168 goals in 931 appearances.
"I am feeling good, enjoying my football more than ever and, most importantly, I feel I am making a contribution to the team," said Giggs.
"This is an exciting team to be part of, with great team spirit, and we are again pushing for trophies as we head towards the business end of the season."
United manager Sir Alex Ferguson said: "Ryan is an example to us all, the way in which he has, and continues to, look after himself.
"What can I say about Ryan that hasn't already been said? He is a marvellous player and an exceptional human being.
"He has fantastic energy for the game and it is wonderful to see. Ryan seems to reach a new milestone every week, and to think that he now has 23 unbroken years of league goals behind him is truly amazing in the modern-day game. I don't think it will ever be achieved again by anyone.
"His form this year shows his ability and his enjoyment of the game are as strong as ever and I am absolutely delighted that he has signed a new contract."
The new deal means Giggs will play past his 40th birthday on 29 November.
Among his honours are 12 Premier League titles and four FA Cups as well as three League Cups and two Champions League titles.
He won 64 caps for Wales before quitting international football in 2007, and captained Great Britain at last summer's Olympics in London.
Including his Wales caps and his four for GB, Giggs could make his 1,000th senior appearance on Saturday against Norwich in the Premier League - or if he does not feature in that game, against Real Madrid in the Champions League on Tuesday.
His goal in United's 2-0 win over Everton on 10 February means he has scored in each of the last 23 seasons, including all 21 Premier League campaigns.
"He still has that wonderful youthfulness in the way he plays, he still has great balance and a change of pace," added the United boss. "He still has his fitness and still gets you a goal."
"I told him this morning I expect a bill from his mother for all the sandwiches and teas she used to make for us when we went to his house every week when we were trying to get him to sign schoolboy forms.
Ferguson also believes that Giggs will initially remain within the Red Devils fold when he does eventually decide to hang up his boots.
"The plan is for Ryan to stay on (at the club after he's finished playing)," said Ferguson. "Involvement after they've played here is important, whether that be as a coach or assistant manager or working with the youth team.
"If anyone has ambitions to be a manager you should take on different roles before you get there, almost as a preparation. He [Giggs] has got to take his badges and spend time with the young players in the academy and prepare eventually to be a manager."