The 33-year-old defender's present deal was due to expire and he and other experienced players were warned they would have to take a pay cuts to stay.
But McManus told the Well website: "I'm delighted to be staying at Motherwell as I have thoroughly enjoyed my three years at the club.
"I enjoy the coaching and the people around the place are great."
McManus, who won 26 caps for Scotland and started his career with Celtic, joined Motherwell in 2013 after leaving Middlesbrough following loan spells with Bristol City.
He played 40 times this season as Well finished fifth in the Scottish Premiership.
Experienced players James McFadden, Scott McDonald, Steven Hammell and Keith Lasley have also all been offered new contracts on reduced terms.
Manager Mark McGhee said: "Stephen has been excellent and we're extremely pleased he has agreed to stay with us as we know he had offers from elsewhere.
"I firmly believe we were able to develop some of the talented younger players like Ben Hall because of his and the other experienced lads' influence.
"He has the knowledge and ability and will continue to be a huge asset for us.
"I look forward to working with him again in the coming seasons."
Captain Stephen McManus has ended speculation over his Motherwell future by agreeing a new two-year contract.