The Germany international has made just one Bundesliga appearance this term due to a back injury but has seen his name linked with a host of Europe’s top clubs.
Gundogan's previous deal was due to expire at the end of next term with the close-season expected to see many fighting for his signature.
However, he has agreed an extension at Signal Iduna Park which sees him remain under contract until June 2016 and he remains eager to play a part in the club's future.
"I am very grateful that my club gives me the opportunity to continue to be part of this special team and this very special environment," he told Dortmund's official website.
"I will do everything to help my colleagues again soon and can be very optimistic about the coming weeks and months."
After moving to Dortmund from Nuremberg in 2011, Gundogan made 81 appearances in his first two campaigns for the club, scoring nine goals and securing a double of Bundesliga and DFB-Pokal crowns in 2011-12 as well as a UEFA Champions League final appearance last season.
The club’s sporting director Michael Zorc added: “We are very pleased with this deal against the backdrop of a special injury-related situation and hope that Ilkay will recoup his full potential from next season for BVB."
