The deal takes the German through to the summer of 2024 and he follows fellow defender Andrew Hughes in penning fresh terms - Hughes signed a new deal earlier in the month.
Bauer, 29, joined PNE on a Bosman from Charlton Athletic in June 2019 and he's since made 78 appearances.
He missed the second-half of the 2020/21 campaign with a ruptured Achilles tendon but has come back strongly this season.
On Saturday, Bauer scored PNE's goal in the 1-1 draw with Birmingham City at Deepdale - his eighth goal in Preston colours.
North End manager Ryan Lowe said: "The contract negotiations were ongoing before I came which I respected, when you have got good players in talks you want that.
"He suits the way I want to play, his statistics and everything else have gone through the roof since I have come through the door in terms of my style.
"Patrick is a solid defender, a good lad, a good footballer, they are the type of player you need in the Championship.
"These players are hard to find, consistent performers on a weekly basis. Patrick Bauer is one of those types of player.
"I'm really pleased he has committed his future to Preston North End and long may his performances continue."
Bauer, Hughes, Brad Potts, Emil Riis and Jordan Storey have now signed contract extensions in recent months.
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