The 34-year-old centre-back, who joined from Deportivo La Coruña in July 2018, has made 251 appearances for Newcastle United across all competitions and is the second-longest serving player in the current squad. His contributions have included two Champions League qualification campaigns and the Carabao Cup triumph last season.
Schär's extension was agreed after he suffered an injury that ended his 2025-26 season prematurely. He has been working to regain full fitness ahead of pre-season and is expected to return to the squad during the summer programme.
He said: "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."
He acknowledged the frustration of his injury while setting out his intentions for the coming campaign.
"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."
Manager Eddie Howe was unambiguous about Schär's value, citing both his technical output — he has scored 22 times for the club, an exceptional return for a centre-back — and his leadership influence within the group.
"Fabian has been outstanding since I arrived at the football club. 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."
Howe added that Schär's absence had been felt acutely in the final weeks of last season.
"His creative distribution, defensive mentality and huge experience was a big miss towards the end of the last campaign."