McAuley's previous deal was due to expire at the end of the month.
The Northern Ireland international, 35, who joined the Baggies on a free transfer from Ipswich Town in 2011, lost his place at the start of last season under Alan Irvine.
But he became a regular in the starting line-up again in the second half of the campaign under Tony Pulis.
McAuley returned to Albion's training ground on Monday to sign the new deal after playing for Northern Ireland in Saturday's Euro 2016 qualifier against Romania, which ended 0-0.
West Bromwich Albion defender Gareth McAuley has signed a new one-year contract with the Premier League club.