The former Dundalk full back was linked with a move away from the Brandywell but has opted to remain with the Candystripes for another season
Negotiations had been ongoing with the former Dundalk defender, who had received offers from a number of other clubs, but he has finally committed to the Candystripes for another season.
Speaking to derrycityfc.net, Derry manager Declan Devine said: "I’m delighted that Simon has decided to re-sign for the coming season.
"I believe that he is the best full back in the country and has always shown himself to be a model professional and a player with exceptional attacking and defensive qualities."
Madden admitted that it was a difficult decision but was convinced that Derry were 'going in the right direction' having just won the FAI Cup and earning European football.
"It was a difficult decision," he told the Londonderry Sentinel. "Because I’m from Dublin and a few clubs from Dublin were talking to me, so that’s why it has taken me this time to decide to re-sign as I have to think about a few things.
"But I felt Derry are going in the right direction and with us playing European football next season and having just won the FAI Cup, it just felt right to sign again."
Madden, 24, joined the Foylesiders at the beginning of the 2012 season and was part of the 2012 FAI Cup winning team.