Morales joined the MLS side from Malaga on a free transfer last year.
The 30-year-old was named MLS Newcomer of the Year in 2014.
“Since Pedro joined our team at the beginning of last season, he has been nothing short of a top player and professional,” said Whitecaps FC head coach Carl Robinson.
“Pedro is instrumental to the success of this club and a true leader for our young group of players.”
“My family and I are extremely happy in Vancouver and I am fully committed to this club,” Morales said.
“From Carl Robinson, to my teammates, to all the staff, and of course the fans, this is a first-class organization and I’m so proud to be a part of it. I will continue to work hard to help Whitecaps FC achieve success.”