Tiago has signed a one-year contract extension with Atletico Madrid, the club have confirmed.
Having missed much of the season after suffering a broken leg in November, Tiago made his comeback in the final match of the Liga campaign against Sevilla.
However, the 35-year-old's recovery did not come in time for him to secure a place in the Portugal squad for Euro 2016.
Atletico tied Saul Niguez down to a new five-year deal on Wednesday and Tiago has followed suit by signing a contract until 2017.
"His continuity is good news," said Atletico sporting director Jose Luis Caminero in a statement.
"He is a player that gives us a lot of experience on and off the field, which makes him well-liked by his team-mates and the fans.
"His seniority is vital to our team and he is a fundamental pillar of the group."