The Slovenian international moved to the San Siro outfit in a co-ownership from the Bianconeri last summer.
After hugely impressing, the Beneamata have unsurprisingly handed over the required fee to keep the goalkeeper who has reportedly cost the club €11m (£9.5m) in total.
Udinese confirmed the news this afternoon, while adding that they are now the sole owners of Marco Davide Faraoni's agreement.
The defender was sent to the Stadio Friuli last summer as part of the Handanovic deal.
Handanovic has actually been linked with a possible summer move to Spanish giants Barcelona.
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