Papalii, who has rekindled his early-career best this season to become a key cog in the Raiders' premiership push, signed a one-year extension until the end of 2026, the club announced on Friday.
The announcement scuttled rumours that Papalii, the club's most-capped player, could be set for a Super League shift at season's end.
It also sets the fan favourite on track to remain a one-club player, cementing his legendary status.
Papalii said there was no other club he would want to play for.
"Canberra has been a massive part of my life for the last 16-17 years, and to extend for one more year is such an honour," he said.
"I just want to keep performing and show people why I'm staying on for another year."
Now 33, Papalii was a fresh-faced teenager when he made the long move to Canberra from Logan, southwest of Brisbane.
"I think the biggest thing is I moved here as a young boy and became a man," he said.
"I'm married and have kids now and most of my kids have been born here, so it would have been hard to say goodbye."
Seen as a likely bench player at the start of the season, which was widely expected to be his last, Papalii's resurgence has seen him earn a State of Origin recall and be elevated by coach Ricky Stuart to the starting prop position.
As a result of his influential performances, Papalii indicated his desire to play on beyond 2025, but because of salary cap limitations at the Raiders, speculation mounted that it could only be possible at another club.
Stuart said Papalii's re-signing was a reward for the way in which he continues to prepare and play the game he loves.
"Josh will already go down as one of the greatest ever players to wear a Raiders jersey, and he deserves another year playing for the club which he loves," he said.
"Josh has had a fantastic season for us, and his efforts on the field and his leadership off it made it an easy decision to sign him for another year."
Papalii's influence on and off the field will be deeply missed if he is unable to recover from an ankle injury sustained in training last Friday.
Fellow forward Hudson Young rated him "probably 50-50" to overcome an ankle injury in time for Sunday's qualifying final in the nation's capital.
"But I don't know. He's a big fella, so there's a lot of weight going through that ankle, but I reckon he should be all right," the second-rower added.
Tom Starling said he thought Papalii's ankle was "touch-and-go".
"Obviously, Stick (Stuart) will give him right up until the game to be ready to go, but he doesn't want to go out there and let the boys down if he's not right, so if he's not right he'll make the call, and he'll be honest," the hooker predicted.
Starling said the players had been practising their back-up plan all week in the event Papalii didn't make the cut.
When Papalii has been unavailable, fellow Queenslander Corey Horsburgh has been shifted to the front row.
Young said Newcastle-bound forward Trey Mooney firmed as a likely option for his coach.
"He's done a job every time he's come up to play, but I'm not too sure what way the coaches and that are thinking,'' Young said.
"Trey's been outstanding every time he's played for us."
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