The 30-year-old, who has been with the club since 2002 and make his competitive debut in 2010, has penned a three-year deal.
Celtic won the league on Wednesday night after a 1-1 draw with Dundee United – Forrest’s tenth with the Glasgow giants – and while the Scotland internationalist has not been a regular this season, partly due to injury, manager Ange Postecoglou still sees him as a vital part of the squad.
“James is my kind of player and has that attacking intent that can open up defences to make goals, not only for himself, but for others as well,” said Postecoglou.
“He’s been a great servant to the football club thanks to his brilliant quality and attributes, and those have made him a proven contributor to the club’s success – you only have to look at his medal collection to see that.
“I know we will get more of this from him next season and beyond, and I’m delighted that this deal has been finalised.”