The Colombian, who has made 29 appearances in all competitions this season, was due to be out of contract in 2016.
However, he has now committed to the San Siro outfit for a further 12 months.
The news will come as a boost to the men from the Italian capital, who currently sit sixth in Serie A and are chasing a European berth.
Guarin joined Inter from Porto - initially on loan - in 2012, but was on the verge of a switch to Juventus in a swap deal involving Marko Vucinic in January.
This latest development brings an end to speculation over the player's future, which had also seen him linked with a move to Chelsea.
Guarin has scored 14 goals in 82 appearances for Inter.
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