The 40-year-old Alfredsson had been contemplating retiring after last season, but the Senators received word from his agent today letting them know he'd be back.
Alfredsson has served as Ottawa's captain for 14 seasons.
In 47 regular-season games with the team last year, the native of Goteborg, Sweden, scored 10 goals and 16 assists. In the playoffs, he scored four goals and six assists in 10 games.
The six-time NHL all star has scored 426 goals and added 682 assists in 1,178 career N-H-L regular-season games.