The 36-year-old, who made his debut for the League One club in 1995, has accepted the offer of fresh terms at Ashton Gate.
City head coach Sean O'Driscoll has said that Carey will be an important figure at the club.
"I think Louis has an important part to play on the pitch; he'll never let anybody down when he pulls on a Bristol City shirt," O'Driscoll told the club's official website.
"We need to change the dynamic of the team and what happens off the pitch is just as important as what happens on it. Louis will be key to that."
Carey has made 642 appearances for the Robins.