"I love being at this club and I feel I've improved my play in my time here," said Nikorima.
"I look forward to being a senior player and helping our team improve and challenge the top teams. Now my immediate future is settled I look forward to playing my best footy."
"It's great news for the club that Kodi has executed his option," added Warriors recruitment manager Peter O'Sullivan.
"His decision to stay will give our playmakers some stability as they forge new combinations and will help in our goal to be a consistent, high-performing team in the NRL."
In 2020, Nikorima contributed 18 try assists, five line breaks and three tries, as well as putting his teammates into gaps on 20 occasions.
But last month, Nikorima recognised that he still had work to do to be an elite playmaker in NRL.
"I've been alright," said Nikorima. "There is a lot of room for improvement.
"Obviously when you go based off results, the spine or the halves are usually the ones that tend to cop it the most and there's a couple of games that could have [gone] our way."
Warriors head coach Nathan Brown also noted that Nikorima has more to offer the team.
"I have a lot of faith in Kodi and I'm glad his future is settled for next season," he said.
"Now we can concentrate on us winning games and being consistent.
"Kodi's a popular and important member of our squad and I'm sure it will give the group a big lift knowing he has been secured for another season."