Crotty, who's preparing to return from injury for the Crusaders' Super Rugby quarter final match against the Highlanders on Saturday, has also signed on with Canterbury for another year.
The 28-year-old has played 27 tests for the All Blacks, including the first test against the British and Irish Lions last month, and has played 119 Super Rugby games for the Crusaders.
Crotty admitted he considered overseas options but chose to stay in New Zealand.
"I like to take things one year at a time and when I thought about where I could picture myself in 2018, I just didn't feel like my time here in New Zealand was up yet," he said.
"I still get a thrill each time I pull on the black or red and black jerseys and I feel really motivated to perform for those teams. I genuinely think I have my best rugby in me yet and I want to play that rugby for the teams I have grown up supporting and who I feel so honoured to play for now."
Photo: Photosport Ryan Crotty.