The 51-year-old has been at the club in one capacity or another since 1978 and has been sporting director since his retirement as a player at the age of 36.
Since he took up the role, Dortmund have won three Bundesliga titles and one DFB-Pokal crown, as well as becoming a growing force in the European game highlighted by last year's Champions League final appearance, with Jurgen Klopp as head coach.
Zorc, who holds Dortmund's appearance record as a player, told bvb.de: "I sense that we haven't reached the end of our development yet.
"I see it as our joint responsibility to build on the success of recent years and establish Borussia Dortmund at the summit of German football and as a permanent fixture in the UEFA Champions League in the long term."
Dortmund chief executive Hans-Joachim Watzke said: "Michael Zorc stands for Borussia Dortmund like no-one else. He's been at the club since 1978 and has celebrated a great deal of success, first as a player, then as sporting director.
"That we wish to continue working together for the next five years demonstrates how much we value and trust the high quality of Michael's work."
Klopp and his assistants are contracted to the club until 2018.
Dortmund sit third in the Bundesliga table, 17 points behind leaders Bayern Munich, and face Zenit St Petersburg in the last 16 of the Champions League.