The French winger, whose previous contract was due to expire in the summer, had been linked with a move to West Ham United this month.
"I'm delighted that Jimmy has decided to sign a new deal with us," manager Brian McDermott told the club's official website.
"He believes in what we are trying to do here and he obviously feels Reading is the right club for him and that I am the right manager for him.
"Negotiations have been ongoing for a long time and I am delighted that it has now reached a conclusion with which everyone is happy."
Kebe joined the Royals in 2008.