The veteren fullback had spent several months negotiating his future at the club, but today ended speculation about a possible move to England.
"I know these contract discussions have been going on for some time, but for the last month, my focus has been on getting over my injuries and helping the team on the field," he said.
"I am extremely happy to be playing in Newcastle colours again next year, in what I reckon is the most talented team in the premiership."
O'Davis, who made his first grade debut for the club in 1992, said it had always been important for him to remain a "one-club player".
O'Davis reached the significant milestone of 200 games during the 2003 season, and still holds the try-scoring record for the club (75 tries).
O'Davis, with 206 games to his name, is second only to Tony Butterfield (229) as the clubs most capped player.
However despite the lure of breaking Butterfield's record, O'Davis is as yet undecided about his future.
"Next year, I?ll see how my body is travelling before I make a decision on my playing future beyond 2004," he said.
O'Davis will undergo a medical examination next Monday along with team mates, before the clubs' annual break.
The first grade squad will re-commence training on Monday 10th November.