The 42-year-old signed a new two-and-a-half-year contract only last year, but has now extended his stay with the club for 12 more months.
He told the club's official website: "I'm pleased to extend my contract. I said from the very start that this was always going to be a long-term project and we're still in the early stages of that, but things are certainly progressing well.
"I want to continue building for the future of this club and whilst I am offering the players longer-term deals, it gives it more credence if I have the same.
"This club is known for trying to do things the correct way and we are investing in the infrastructure of the club to make it a more forward-thinking place with solid foundations."
Walsall currently sit ninth in the League One table.