The 27-year-old was loaned to the Royal Blues in the summer and, despite picking up a serious knee injury which rules him out for the rest of the campaign, the Gelsenkirchen club have nevertheless taken the option to sign the defender permanently.
He appeared in 10 Bundesliga games and made four Champions League appearances before tearing cruciate knee ligaments at the end of November.
"Up until his serious injury, Dennis' performances were more than satisfactory," said Schalke's director of sport Horst Heldt.
"His versatility helped us overcome shortages in personnel during the first half of the season.
"He identified with the club and the region from the very first moment."
Aogo, who has been capped 12 times by Germany, said: "I felt a great deal of faith in me from the moment I arrived, which is why I am happy and grateful that Schalke are giving me such a positive signal with this contract.
"It motivates me even more to get fit again soon."