Albion announced around a month ago that they were in negotiations with the former Republic of Ireland international after he failed to make enough appearances in 2012-13 to guarantee the final season of the two-year deal he signed in April 2012.
And with the Baggies on Tuesday morning confirming those talks are now complete, Reid is set for an 11th consecutive Premier League campaign.
He had already written on his Twitter account: "Delighted to be extending stay at WBA. Thanks for all the positive messages last few weeks. Roll on next season!"
West Brom boss Steve Clarke is optimistic Reid can make an important contribution next season - so long as the 32-year-old is not hampered by injuries as much as he was last term.
"I'm delighted Steven has committed himself to the club for another year," Clarke told www.wba.co.uk.
"He's a good pro, has bags of Premier League experience and is a great character to have both within the squad and around the training ground.
"If he has better luck with injuries, Steven will have a big part to play here in the new season."