The 37-year-old has been the Blues’ number two ‘keeper since signing from Premier League rivals Manchester City in 2017.
West Ham had been hoping to move for the Argentine this summer, as they look to provide back-up for Polish stopper Lukasz Fabianski.
However, Caballero has now committed to Chelsea for the 2019/20 season, joining teammate Olivier Giroud, who signed a similar extension yesterday.
“I am very happy to renew my contract with Chelsea and hopefully we can enjoy the next season and achieve a lot of targets,” Caballero said. “For me to stay at a big club like Chelsea was a really easy decision.”