The 29-year-old is the Wolves' longest-serving current player and penned the three-year contract extension on Thursday to affirm his commitment to a club he joined in 2007.
He said: "Everybody knows how much Wolfsburg and the fans, as well as the city, means to me and I'm very happy here with my family.
"I am glad they have given me the chance to be able to play my part in their success over the long term.
"I'm really happy playing for this club and have a lot in mind over the coming three years."
The former club captain made his 200th Bundesliga appearance for the Wolves at the end of last month and, although he is no longer captain, he remains a key figure at the club.
"We're delighted that we can rely on Marcel for the next three years," said Wolfsburg's director of sport Klaus Allofs.
"He's a very important player for the team and he is a key figure on the field, not only due to his experience.
"Since he is a person the people of Wolfsburg can identify with, we are even happier that Marcel has committed his future after his playing career to Wolfsburg and that he will remain here in another role."
Schafer's biggest achievement with the club was winning the Bundesliga title in 2009.