The duration of the Irish international's new contract has not been disclosed.
The 29-year-old full-back has made more than 200 appearances for Tigers since his debut as a teenager in November 1997 and has scored 78 tries.
A member of four previous championship-winning squads, Murphy has added EDF Energy Cup and Guinness Premiership titles to his record this season and is chasing his third Heineken Cup winners' medal this weekend.
"I am very happy at Leicester. I have been here a long time now and I was delighted to be asked to stay," said Murphy, who will hope to add to his 46 Ireland caps when he joins up with Eddie O'Sullivan's squad on Tuesday ahead of the two summer tour Tests against Argentina.
"I arrived at Leicester in 1997 and made my debut in November that year. I have made a lot of friends in Leicester over the years and I really enjoy my rugby here. It is a great club, I love the rugby here and I love the fans."