The 31-year-old joined the League Two side from Scunthorpe United on a free transfer last summer.
"I'm really pleased to have signed," Newey told the club's official website. "It is a good club with ambitions to keep moving forward and I have really enjoyed my time here.
"Personally, I want to play in a successful side and signing for Oxford gives me that opportunity next season."
Newey scored one goal in 47 appearances for Oxford last term.