Former Blackburn Rovers & Liverpool manager signs on with Burnley's Premier League rivals for another year
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The 75-year-old returned to Selhurst Park in March and guided the club to Premier League safety, eventually finishing in 11th place.
The former England boss previously led the Eagles between 2017 and 2021.
“I am immensely pleased and proud to be extending my time at Crystal Palace and I would like to thank the chairman and sporting director for their continued faith in me,” Hodgson told Palace’s official website.
“I know what a fantastic squad we have here. It’s a great blend of youth and potential, alongside experienced players with Premier League and international pedigree.
“I have spoken with the chairman at length and we agreed that we must be ambitious in getting the most out of such talent.
"As such, we have set ourselves the target of a top-half finish, which we believe is eminently achievable with such a fabulous group of players and the most magnificent supporters who get behind the team, week in, week out.”
It’s understood Palace scoured the managerial market for potential alternatives at the end of last season, but eventually settled on keeping Hodgson at the helm.
“Roy’s record as manager speaks for itself,” chairman Steve Parish said.
"His return earlier this year produced a fantastic return both in results and producing some stylish performances, helping us climb the table and get international recognition for our players.
“Appointing Roy for another season will enable him and the squad to hit the ground running for a full pre-season and continue the magnificent momentum that has built up since his return.”