The 22-year-old utility player was out of contract at the end of the season but the former England U19 international has agreed to stay on until the end of the 2019 season.
Co-director of football Phil Giles said: "Nico and I spoke recently about the change in fortunes that happened for him when Lee Carsley became head coach in September.
“He produced a series of impressive performances at right back, and has deservedly earned a new contract that we were more than happy to offer.
“We are all looking forward to seeing Nico continue to develop as a Brentford player over the coming seasons."
Yennaris joined from Arsenal in January 2014 but only played 12 games for the club in his first 18 months at Griffin Park, spending time on loan at Wycombe last season.
Head coach Dean Smith added: “It is great news that Nico has pledged his immediate future to the Club.
“Nico has shown himself to be very diligent in his approach to his profession. He has shown that he wants to further develop and is keen to establish himself within the first team.
“I believe that he can go on to play a lot of matches for Brentford and he is keen to continue the recent success of the club.”