Manchester City were believed to be after the Bosnia and Herzegovina international who was the Bundesliga's top scorer last season.
Related ArticlesAdebayor future at City safeValencia confirm Manchester City talks for David SilvaManchester City postpone Dzeko moveManchester City eye £50m bid for Silva and DzekoIreland demands to leave CitySport on television"The deadline within which a transfer of Edin Dzeko would have been possible this year has now elapsed. We are very happy that this period of uncertainty is over," said the club's general manager Dieter Hoeness.
"Edin staying with us is the most important personnel issue of this summer.
"He is a player of exceptional quality, who wouldn't have been easy for us to replace. We have now some planning security for the coming campaign and we can work solidly on the rest of the squad details for the new season."
News that Dzeko will be at the club next term will be a major boost to new boss McClaren who has been tasked with re-establishing the former champions as a force in German football.
Wolfsburg, who won the title in 2008/09, could only finish eighth last term.
Dzeko is under contract with the club until 2013.