The former Italian international was tipped to make a return to his homeland this summer, but has effectively agreed to end his playing career at Stamford Bridge.
Chelsea boss Claudio Ranieri had already outlined his desire to keep the diminutive striker at the club and will be delighted with Zola's decision.
Zola, 34, looked set to return to Italy last summer, but instead opted to sign a one-year extension to his Blues contract.
Zola is recognised as a firm fans' favourite after joining Chelsea in a £4.5million switch from Parma in November 1996.
He was named Football Writers' Player of the Year in 1997 and has helped The Blues win two FA Cups, the Coca Cola Cup and the European Cup Winners Cup.
