"I have decided that I want to stay," Ancelotti, whose contract ends in June but is due to be automatically renewed for one year if the club finish in the top three, told a news conference on Friday.
"Things are very clear. The work I have been doing will be judged at the end of the season. If everybody is happy I will be happy to stay. Then we will be able to extend the adventure here."
Last month, club president Nasser al Khelaifi said he wished Ancelotti and sports director Leonardo would stay next season.
Ancelotti took over from Antoine Kombouare in December 2011 as PSG finished second in the top flight last season.
This term they have 64 points with seven games left and lead Olympique Marseille by seven points. PSG also reached the Champions League quarter-finals but were eliminated by favourites Barcelona 3-3 on aggregate.