The 35-year-old has been a regular at right back for much of 2010, and he will continue as club captain for another year at Old Trafford.
"We've agreed a contract with Gary Neville for another year," Sir Alex confirmed on Friday morning. "We've been working on it for a couple of weeks now.
"We're delighted with that. We think he deserves it because his contribution to the club has been fantastic. As I've said time and again about certain players, they make a career out of their will and determination to do it. Gary is one of those players."
The Reds skipper was praised by Sir Alex for his "astonishing" comeback from 18 months out with a series of injury problems, which began with an ankle ligament problem he suffered in a challenge with Gary Speed against Bolton in March 2007.
"The amazing thing he has achieved is coming back from a year-and-a-half out in his thirties," said the boss. "To get to the level he is playing at today is astonishing.
"The man is doing it because he wants to do it, he has the determination and drive within himself not to give in on his career. He's getting the rewards for that because his performances levels have been outstanding, and at an important time for the club.
The boss admits there were times when he did harbour concerns that the 35-year-old would ever return to his former levels of performances.
"We worried about it," he said. "When you're out for 18 months in your thirties, it is a concern. We