The 23-year-old forward, who was born in the capital, made his debut in the Black and Red against Ospreys in November 2004 and has since surpassed the 50-appearance mark for Edinburgh.
Capped at Scotland 'A' level, the former Royal High student cited Edinburgh's phenomenal potential as being the key reason behind his decision to stay with his hometown team.
MacDonald said: "The main reason why I wanted to stay with Edinburgh was the squad's potential.
"With the way we are developing as a team, I'm confident we can go on and win trophies.
"We have got a fairly young squad, but we've been together a few years now and over the next couple of seasons I believe we can progress onto the next level.
"Edinburgh have already shown over the past few seasons that we are capable of achieving good results and hopefully that can continue against Leinster on Friday night."
Following his man-of-the-match display against Cardiff - Edinburgh's fifth successive home win - MacDonald retains the number seven jersey in a largely unchanged starting line-up for the visit of champions, Leinster.
Lock Jim Hamilton returns to the side after missing the win over the Blues with a shoulder injury while Ryan Grant is named amongst the replacements after recovering from an eye problem.
Andrew Turnbull has returned to the squad after being a late withdrawal from the previous starting line-up after suffering from a sickness bug.
Allister Hogg keeps his place at the base of the scrum and the back row forward has already surpassed the 1,000 minute mark this season after being an ever present in Edinburgh's starting line-up.
MacDonald follows in the footsteps of Scotland prop Geoff Cross and new signings Scott MacLeod, Ross Samson and Roddy Grant by pledging his allegiance to Edinburgh next season and the club's supporters can follow suit on Friday when the 2009/10 season ticket packages will be unveiled before the Leinster match.
Edinburgh's record appearance holder, Allan Jacobsen - currently sidelined with a shoulder injury - will host an exclusive event at Murrayfield's Thistle Suite (from 6pm) for season ticket holders who will get the opportunity to sign up for next season's great value deals.
The season ticket launch will take place on Monday April 20 with full details to appear on the club's official website, edinburghrugby.org.
Jacobsen said: "Everyone is really optimistic about what Edinburgh can achieve next season. We believe we are a team heading in the right direction and, in the 10 years I've been involved with Edinburgh, this is most excited I've ever been about the future."
On the injury front, Mark Robertson (hamstring) are joined in the treatment room by long term casualties Jacobsen (shoulder), Ross Rennie (knee), David Callam (hip), and Steven Turnbull (ankle).
Edinburgh Rugby Club squad to play Leinster in the Magners League at Murrayfield (Friday 17 April, kick off 7.45pm, live on Setanta Sports)
15 Chris Paterson
14 John Houston
13 Ben Cairns
12 Nick De Luca
11 Simon Webster
10 Phil Godman
9 Mike Blair (captain)
1 Kyle Traynor
2 Ross Ford
3 Geoff Cross
4 Craig Hamilton
5 Jim Hamilton
6 Scott Newlands
7 Alan MacDonald
8 Allister Hogg
Substitutes: Andrew Kelly, Ryan Grant, Scott MacLeod, Matt Mustchin, Greig Laidlaw, David Blair, Andrew Turnbull.
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