O’Connor, Vale’s player of the year last season, is out of contract at the end of this month and has taken his time before deciding to commit himself to Vale Park.
Manager Rob Page told the club’s official website: “We’re ecstatic to have agreed terms with Michael O’Connor.
“It was clear for all to see last season that he was a key player for us and he was someone we were extremely keen to keep.
“I think the fact he is staying is a statement of intent from everyone at this football club.”
Belfast-born O’Connor, who started out at Crewe and has had spells at Scunthorpe and Rotherham, joined Vale from the latter last summer and still lives in Lincoln.
He made a total of 47 appearances for Port Vale last season, scoring seven goals.