A statement on the Chelsea website said the club were "delighted" Cole had signed the new deal.
"I am very happy that Ashley has committed himself to Chelsea," said manager Carlo Ancelotti.
"He is one of the best left-backs in the world but I believe his best is yet to come.
"I am very pleased that will happen in a Chelsea shirt."
Cole, who is in the England squad for Saturday's friendly against Slovenia and next week's World Cup qualifier against Croatia, has started every Chelsea game this season under new boss Carlo Ancelotti.
Since leaving Arsenal three years ago Cole has won the FA Cup twice and the League Cup once with Chelsea, as well as reaching the 2008 Champions League final where his side were beaten by Manchester United.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.