Parkinson, who defected to ITV after 33 years at the BBC in 2004, will continue to host his primetime Saturday night chatshow 'Parkinson' until at least the end of 2007.
His talkshow is the UK's highest rated with the first series attracting an average of 6.4m viewers to each show on ITV.
Parkinson, affectionately known as Parkie, has attracted major stars over the years such as Nelson Mandela, Mohammed Ali, Sir Paul McCartney, Tom Cruise, Will Smith and the Beckhams.
Parkinson said: "I'm really delighted to have signed for another year at ITV. It was an easy decision. I've felt at home here since I first arrived and the show has gone from strength to strength."
Parkinson is set to return to ITV for his fourth series in March with A-list stars including 'Basic Instinct' star Sharon Stone, Jamie Foxx, Bette Midler and Jane Fonda confirmed for the line-up.
The Barnsey-born presenter first started his career on newspapers, including the then Manchester Guardian, until he became a feature writer for the Daily Express.
From 1979 until 1982, he also presented 'Parkinson' for ABC and Channel 10 in Australia. In 1995, the BBC ran a series, called 'Parkinson: The Interviews', of some of the all-time greats that Parkinson has interviewed including Ingrid Bergman, Bob Hope, Bing Crosby and Bette Midler.
Other TV credits include 'Give Us a Clue' in the 80s and 'Desert Island Discs' for BBC Radio 4.
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