The 40-year-old Alfredsson had been contemplating retirement after last season, but the Senators received word from his agent Friday letting them know he'd be back.
Alfredsson has been Ottawa's captain for 14 seasons.
In 47 regular-season games last year, the Swede had 10 goals and 16 assists. In the playoffs, he scored four goals and six assists in 10 games. The six-time all-star has 426 goals and 682 assists in 1,178 career regular-season games.