"I am privileged today to announce to our fans that Joe will be returning next season," Avs GM Francois Giguere said in a statement. "Joe is the heart of this organization and his leadership and value to this team and especially our young players is unquestioned.
"He played some of his best hockey this past season and was a major part of the late-season success we enjoyed. Joe's contributions both on and off the ice for this organization cannot be understated."
Sakic, 37, finished his 18th NHL season as the club's leader in points (100), goals (36) and assists (64) while appearing in all 82 games for the second-straight season and sixth time in his career.
"I was really impressed with the way this team came together and am looking forward to next year," Sakic said in a statement. "To witness the growth of our young players and see how they performed with some of our other veterans was very encouraging and says a lot about the expectations we'll have for next season.
"As I've said in the past, at this stage in my career, I prefer to do one-year deals as I evaluate my play year-to-year," added Sakic. "But I'm looking forward to next season and we feel very lucky to be a part of such a great hockey market with such amazing fan support."
Sakic recorded 100 points for the sixth time in his career and first since he earned NHL MVP honours with 118 points in 2000-01. He joined Gordie Howe as the only players in NHL history to reach the 100-point plateau at the age of 37 or older.
Sakic also reached the 50-assist plateau for the 14th time in his career, tying Marcel Dionne and Paul Coffey for the third-most 50-assist seasons in NHL history behind Wayne Gretzky (18) and Ron Francis (16).
Sakic will enter the 2007-08 season ranked ninth on the NHL all-time points list (1,589), 14th in goals (610, tied with Bobby Hull) and 11th in assists (979). He tallied his 600th career goal on Feb. 15 at Calgary.