The English Premier League leaders said the deal keeps the 39-year-old Wales winger at Old Trafford until June 2014 and sees him complete a 23rd season as a first-team player.
Coach Alex Ferguson told manutd.com: "What can I say about Ryan that hasn't already been said? He is a marvellous player and an exceptional human being. Ryan is an example to us all, the way in which he has, and continues to, look after himself.
"He has fantastic energy for the game and it is wonderful to see. Ryan seems to reach a new milestone every week and to think that he now has 23 unbroken years of league goals behind him is truly amazing in the modern-day game.
"His form this year shows his ability and his enjoyment of the game are as strong as ever and I am absolutely delighted that he has signed a new contract."
Giggs signed professional forms with United in 1990 and made his debut on March 2, 1991. He has made 931 appearances for the club -- a Manchester United record -- and scored 168 goals.
He has been capped 64 times for Wales and played four times for the British Olympic men's football team at last year's London Games.
During his impressive storied career, he has won 12 Premier League titles, four FA Cups, three League Cups, two Champions Leagues, one Super Cup, an Intercontinental Cup and a FIFA Club World Cup.
Giggs said he was "delighted" to have signed a new contract and despite his advancing years said he was "feeling good, enjoying my football more than ever and, most importantly, I feel I am making a contribution to the team".
He added: "This is an exciting team to be part of, with great team spirit, and we are again pushing for trophies as we head towards the business end of the season."
Ferguson told a news conference later that he believed Giggs will stay at Manchester United in a coaching capacity when he finally hangs up his boots, which could help him if he eventually decides to take on a managerial role.
"Several players are still involved in the club. It is important we install players who have been involved here. It is important if anyone has ambitions to be a manager you should take on various roles before you get there," he added.
Giggs' landmark 1,000th game comes against Norwich City on Saturday, which could see United move 15 points clear at the top of the league before rivals Manchester City face struggling Aston Villa on Monday night.
"Norwich is an important one," Ferguson told reporters. "Tuesday (against Madrid in the last-16 of the Champions League) will look after itself, it's an occasion on Tuesday.
"Norwich is where our concentration is on. The players will not be thinking about Tuesday because all week we have been talking about Norwich."
Robin van Persie returned to training this week and is available for both games, Ferguson said. The striker injured his hip when he collided with a camera man during their win over Queens Park Rangers last weekend.
Phil Jones, however, faces a battle to make the Madrid game due to a troublesome knee injury.
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