The Italy Under-21 international arrived at San Siro just over 12 months ago as part of a co-ownership agreement with Genoa but the Rossoneri have since bought the player outright.
Following the departure of star forward Zlatan Ibrahimovic for Paris Saint-Germain, Milan have moved to tie El Shaarawy down to a new deal.
"AC Milan announce that they have extended the contract of Stephan El Shaarawy until June 30, 2017," a statement on the club's official website read.
The 19-year-old striker, who was born in Savona to an Egyptian father and Italian mother, scored two goals in 22 Serie A appearances last term.
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