According to the club website, the 28-year-old was an unrestricted free agent and could have left the Eagles to join a club of his choice but elected to sign the deal which will see him become a 10-year player at the club next season.
Nicoski did not play a game in 2012 after suffering complications to a serious hamstring injury he obtained during the NAB Cup Grand Final.
He is on track to begin pre-season training in November and will be hoping to rediscover the form he showed in 2011 when he kicked 41 goals.
Eagles list manager Craig Vozzo is confident the exciting forward can get back to playing his best footy in 2013.
"We're delighted we've signed Mark for another year," he told the AFL website."We're very confident he's going to come back strong and have a real impact next year."