The 32-year-old, who can play at the back or in midfield, had turned down an initial contract offer in May.
Boss Ian Sampson said: "Andy was perfectly entitled to look around last month but we are delighted that he will now be staying with us after all.
"He has all the attributes of a good, experienced player and you need those in any squad."
The former Hull City player, who made 36 appearances for the Cobblers last season, had initially been set a deadline of 19 May to decide on his future.
Striker Adebayo Akinfenwa was released after failing to meet the curfew, but it would seem Holt has been given a second chance.
"We have reached a compromise on his contract that suits all involved and this is terrific news," said Sampson.
"He has got a good fitness record, he is a top professional and an excellent example to the younger players, he can play in defence or in midfield and he is a leader in the dressing room.
Holt arrived at Sixfields in June 2006 on a free transfer from Wrexham, and has made 121 league starts for the Cobblers.
Source: BBC Sport
Source: BBC Sport