Kirch arrived at Signal Iduna Park from Kaiserslautern in 2012 and has made 12 appearances in two seasons for Jurgen Klopp's men.
Despite his lack of game time, Klopp described Kirch as undergoing "the greatest development of a 31-year-old I've ever seen".
"What Oliver Kirch has shown in recent weeks and months, is exceptional," said sporting director Michael Zorc. "He is an enlivening factor in the team and fits athletically as humanly perfect to Borussia Dortmund.
Kirch himself added: "I am grateful for the trust and opportunity given to me on a daily basis at this high level with world-class players to measure.
"I will do everything that we can celebrate many successes as early as next season."
Kirch's contract had been due to expire at the end of this season.
