The Brazil international spent last season with the Cottagers, having joined on a free transfer after leaving Corinthians, and helped them secure a 10th place finish on their return to the Premier League.
Willian scored five goals and provided five assists in 27 appearances for Marco Silva's men last season.
The 34-year-old's contract with Fulham expired at the end of last month and he held talks with Nottingham Forest last week but has ultimately chosen to remain with Fulham.
“I’m completely happy," the former Chelsea and Arsenal winger told Fulham's official website.
“Happy to sign one more year with Fulham. Happy to continue the work that I did last season with all my teammates and the whole club. I think it’s a club that can do even better this season, so I’m happy to continue this amazing adventure.”
Fulham owner Tony Khan said: “I’m thrilled that Willian will return to Fulham for at least one more season.
“He was a very important addition last summer and was a significant contributor during one of the most successful Premier League campaigns our club has ever had.
“We’re all very excited that he’ll return to Craven Cottage as we aim for another successful season in the Premier League together.”
Willian has 70 caps for the Brazil national team.
