“It was Serge’s explicit desire to be loaned for another year so that he could gain more playing time,” said Bayern CEO Karl-Heinz Rummenigge.
“In my opinion, with Hoffenheim, this is guaranteed and also at a high level. After this year, Serge will return to Bayern.”
Gnabry will be eligible to play in the Champions League with Hoffenheim next season, as well as competing in the Bundesliga and DFB Cup.
The 21-year old joined Bayern in June, signing from fellow Bundesliga side Werder Bremen, following a highly successful campaign in 2016/17 in which he scored 11 goals in 27 games to help secure Werder an eighth-place finish.
The former VfB Stuttgart and Arsenal man was part of the Germany-U21 team which won the UEFA Under-21 European Championships in Poland earlier this summer.
Watch: Serge Gnabry's top 5 goals of the 2016/17 season!