India's all-time top international goalscorer, with 50 goals in 90 appearances, will be with the team for the 2016-17 season.
Chhetri has played for the side for the last three seasons, winning I-League twice and one Federation Cup. He joined Indian Super League (ISL) franchise Mumbai City FC on loan from Bengaluru last season.
"We are pleased to announce Sunil as a BFC player in what will be his fourth season at the club. I don't think we need to be vocal about what he brings to the club and the kind of impact he has in the dressing room and outside of it," said the club's chief operating officer Mustafa Ghouse in a statement.
"He's been a top professional and leads the team by example and we feel he has a lot more history to script with Bengaluru FC."
Chhetri finished top scorer for the club for the third successive season last term, taking his goal tally across all competitions in a BFC shirt to 35.
"I've always said BFC is family to me. We're doing some amazing things at this club and I'm delighted to pen this deal. We've had a brilliant season and I'm really looking forward to build on it with the team," said Chhetri.
"The fans, management, staff and dressing room have all made me feel at home from the day I stepped in to Bengaluru and there's a connect with this city that is special."