The 35-year-old's career has enjoyed something of a renaissance since Nigel Clough's appointment as manager at the start of the year.
Frozen out under previous boss Paul Jewell and loaned out to League One club Brighton, Savage looked set to leave Derby.
But the former Wales international is now a first-team regular and an integral part of Clough's plans.
"If you'd have suggested to me eight months ago I'd be signing a contract extension I'd have thought you were mad," said Savage.
"But it's been an incredible turnaround and there is no-one happier than me to have proved I can still do a job for this great club.
"I can't thank the gaffer and his staff enough for what they have done for me. I love my football again and it's down to them. We could be at the start of something special at this club and to know I'm going to be part of it for the next two years gives me a buzz.
"This will almost certainly be my last contract in football and I'll be doing everything I can for this club to go out on a high."