General manager Brian Cashman had said after the team missed the playoffs for the second time since 1992 that the Yankees wanted to keep Girardi, whose name was mentioned for the Cubs opening in his native Illinois.
The 48-year-old Girardi said it would be up to his family if he returned. He was completing his second three-year deal with New York since taking over for Joe Torre after the 2007 season.
"After talking to my family, this is where we wanted to come back," Girardi said.
Despite finishing tied for third in the AL East at 85-77, Girardi had what many believed was his best season as a manager. He kept the Yankees in the playoff chase until late September despite injuries to stars Derek Jeter, Alex Rodriguez, Mark Teixeira and Curtis Granderson.
"I wouldn't have come back if I didn't think we could win a championship," Girardi said. "I have faith in our organization."
Girardi has led the team to the playoffs in four of his six seasons, winning the World Series in 2009. Under Girardi, the Yankees have gone a majors-best 564-408 (.580) since 2008.
He was NL Manager of the Year in 2006, when he led the Florida Marlins to a 78-84 record in his first year as a manager.
A 15-year MLB catcher, Girardi won three World Series titles with the Yankees from 1996-99.
Girardi remains with a high-priced ballclub that places the utmost premium on winning championships, but entered the offseason with great uncertainty.
Mariano Rivera and Andy Pettitte retired, Jeter played only 17 games this year after breaking an ankle last October and A-Rod is still appealing a 211-game suspension.
All-Star second baseman Robinson Cano is a free agent, as are pitcher Hiroki Kuroda and Granderson. And Cano could be seeking a 10-year contract worth up to $305 million.
Also, Yankees managing general partner Hal Steinbrenner has said that the team is determined to get under next year's $189 million luxury tax threshold - which includes about $177 million for player salaries. Cashman, though, recently said it's unclear if the staying within that limit is possible.