Taylor's previous deal was set to expire this summer and there was some conjecture about whether he might leave.
But manager Alex McLeish revealed last week that Taylor had accepted the club's offer of fresh terms.
The Northern Ireland international has now put pen to paper to take him into a seventh year at St Andrew's.
Taylor, 38, has already made 238 appearances for Birmingham and will provide back-up to new recruit Ben Foster next term.
Blues acting chairman Peter Pannu is delighted to have secured Taylor's services for another 12 months.
"Club President Carson Yeung and I both endorse Alex's view that Maik deserves the new deal because of his experience and loyalty and feel there is still so much the club can benefit from with his continued service," Pannu told the club's official website.