The 33-year-old right-back, who joined the club in 2009, has been a stand-out performer for Town this term, starting all but one of the club's 35 league games to date.
Edwards' existing deal was due to expire this summer but he has now agreed to stay until the end of next season, with the agreement also including the option of a further year.
Chief executive Simon Clegg told the club's official website: "We have had good dialogue with Carlos over the last few weeks and I'm delighted to confirm we have agreed terms with him over a deal for next season."
Ipswich team-mates Richard Wright, Grant Leadbitter, Lee Bowyer, Jason Scotland, Tommy Smith and Ibrahima Sonko are also out of contract in the summer.
