The winger, who had entered the final 12 months of his previous deal, is regarded as one of the club's key players.
He was signed from Mbeya City FC as a free agent at the beginning of the just ended campaign.
Selemani had a good season, playing 34 matches and scoring seven goals, while assisting four across all competitions for Azam FC.
The club confirmed the news on their official website, writing: "Winger Idd Seleman 'Nado', today has put pen to paper on a new one-year contract extension to stay on the team. The contract extension allows him to remain at Azam Complex until 2022.”
Azam have been one of the busy teams in the transfer window with six signings.
New arrivals include Tanzanian goalkeeper, David Kissu Mapigano, a previously Kenya's Gor Mahia's keeper, Awesu Awesu (Kagera Sugar), Ally Niyonzima (Rwanda's Rayon Sport), Ismail Aziz (Prisons), Ayoub Lyanga (Coastal Union) and Emmanuel Charles from Mbao FC.
On Tuesday, Azam were also boosted with news that midfielder Salum Abubakary ‘Sure Boy’ had committed to the club despite interest from Yanga who were reported to have tabled an offer that was rejected by the club.
They have retained a core of their squad that finished third in the Premier League with 70 points, 18 points fewer than champions, Simba SC, and two points behind second-placed Yanga.
Azam FC also failed to defend the Federation Cup after being bundled out by Simba in the semi final stage.
They consequently missed out on a ticket to represent the country in the CAF Confederation Cup next season.
Last week, the 2013/14 Premier League champions became the first team to start pre-season training as they look to put behind the disappointment of the last three campaigns.