The USA international, who mostly plays as a full-back, said his “heart” had driven him to commit his long-term future to the club.
"I have become a top-flight player thanks to Nuremberg, and I thank the management of the club for this,” he said.
Chandler, who was born in Germany to an American father and German mother, joined Nuremberg from hometown club Eintracht Frankfurt in 2010 and has gone on to make 43 Bundesliga appearances for the club.
He claimed he had rejected the overtures of Stuttgart to re-sign at Nuremberg, even though they are set to play in the Europa League next season.
"It is a great honour that a top Bundesliga side who will play in Europe for the 2012-13 season would show interest," he added.
"But it was clear to me that my first priority is Nuremberg, as I want to take part in the future development of the club."
Chandler, who was also eligible to play for Germany, has made eight appearances for the USA.
Nuremberg are assured top-flight football after racking up 41 points with two matches remaining, 13 points clear of the two automatic relegation places and 11 ahead of the play-off spot.