The Swedish international has featured nine times in all competitions so far this season having made his return from a lengthy injury lay-off in November's memorable 3-0 Carabao Cup victory away to Manchester United.
Krafth, who joined the club from French side Amiens in summer 2019, has 73 Magpies appearances and 44 international caps to his name. The 29-year-old is highly regarded within the club as a dependable member of Eddie Howe's squad.
Krafth said: "I am delighted to extend my time here and commit to Newcastle United for another year. Personally, it's been a journey of ups and downs since I joined the club, but I feel at home here and I want to repay the faith and support shown in me, especially during my recovery from injury.
"It's a really exciting time for the club on and off the pitch and I'm so pleased to have the opportunity to continue being a part of that and hopefully help the team finish the season strongly."