The actress, who plays Weatherfield schemer Tracy Barlow, is to remain on screen until at least January 2013 under the new deal.
Tracy has been absent from the cobbles in recent weeks after Steve McDonald rejected her following a one-night stand. However, she will return home in September with big news to share.
"We're thrilled Kate is staying with the show," a Coronation Street spokesperson told the soap's official website. "Tracy is a great character and gives us scope for some exciting storylines over the next year."
Tabloid reports have suggested that Tracy will soon reveal she is pregnant with Steve's baby. In a further twist, it is thought that she later discovers she is expecting twins.
Earlier this month, Coronation Street's producer Phil Collinson told Digital Spy that he wanted viewers to have sympathy for Tracy in future storylines.
"I think Tracy is a really important character, and not only for her part in the Steve and Becky story," he said at the time. "I think Number 1 is a brilliant house to go to and we want to go there because of Tracy and her mum and dad. It's a very rich environment story-wise.
"I think, very consciously, we have wanted to put more flesh on the bone in terms of Tracy's character… The story that we're going to tell is as much of an emotional rollercoaster for Tracy as it is for Steve and Becky."
Tracy has been back on screens since Christmas, when she was released from jail unexpectedly.
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Re-live Tracy and Gail's Christmas fight in the video below: