The Sweden international has spent the last four-and-a-half years with the Magpies since joining from Amiens and has made a total of 73 appearances across all competitions.
Krafth made his long-awaited return to Eddie Howe's side in a 3-0 EFL Cup victory away against Manchester United in November after over a year on the sidelines with a troublesome ACL injury.
The 29-year-old has since made a further eight appearances in all tournaments this term, including six outings in the Premier League.
Krafth was due to see his original contract expire at the end of the season, but he has decided to commit his future to St James' Park by penning a new 12-month extension.
"I am delighted to extend my time here and commit to Newcastle United for another year," Krafth told the club's official website.
"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."
Krafth's new deal comes just over two weeks after academy graduate Lewis Miley put pen to paper on a new long-term contract with the Magpies.
Newcastle's No.17 is currently deemed a peripheral figure in Howe's first-team squad, with Kieran Trippier, Valentino Livramento and Dan Burn all preferred ahead of him in the full-back roles.
Nevertheless, Krafth will be hoping to get some more minutes under his belt during the second half of the campaign, with 14 games still remaining in the Premier League for the Magpies as well as an FA Cup fifth-round tie against Blackburn Rovers later this month.