The veteran defender joined the Saddlers last summer and made 29 appearances for Dean Smith's play-off chasing side in his first campaign at the Banks's Stadium.
Holden, 33, has now earned at least another 12 months with the League One outfit while he has also taken on the role of pro development coach among the backroom staff, which will see him work with the club's young professionals.
"I'm absolutely buzzing," Holden said. "I've loved every minute of my time here. The gaffer has been brilliant from the first time I met him and Richard O'Kelly (assistant) has a wealth of knowledge on the game.
"To be offered this dual role is perfect for me. It's such a great environment in which to work and learn. This is an unbelievable opportunity for me to prolong my playing career and also take my first steps into coaching, which is something of real interest to me."
And boss Smith is delighted to secure Holden's services as both a player and a coach.
"He is a tremendous character to have around the place and, as was proved at the start of last season, he is also a very able centre-back who will provide competition to the likes of Andy Butler, Paul Downing and Matt Preston," Smith said.
- Sports & Recreation
- Dean Smith