The 35-year-old former Crystal Palace player was out of contract after being with the Grecians since September 2013 and he has now agreed a deal to stay at St James Park with added coaching responsibilities.
“Danny is a perfect candidate for development into the coaching rank,” boss Paul Tisdale told the club’s official website.
“He has still got a lot of football in him and we are still expecting a contribution on the field, but we are delighted that he is thinking about moving into coaching.
“This year he has done a lot of work in the academy and it seems a natural step for him to move into. I think that development is something that we do really well – whether that is young players learning their trade, or senior players learning new skills as well.
“He is someone who we wish to develop into a coaching position, and this is a very good opportunity for him and us.
“Danny is an excellent influence on the players around him and it is going to be a big help to see him involved more often on the coaching side, as well as continuing adding with his guidance and ability on the pitch.”