The 19-year-old made 21 appearances in all competitions for the Blues in 2016.
Last term she was named Manager's Player, Players' Player, Young Player and Supporter's Club Player of the Season at the club's annual awards.
Carter made her debut for the Blues in 2013, aged 16, in the Champions League.
Birmingham City Ladies defender Jess Carter has signed a new one-and-a-half-year contract with the Women's Super League One club, with the option of a further year.