The 31-year-old was reportedly ready to quit Craven Cottage at the season's end in search of European football, but the Hodgson has insisted that he will be staying put at least until his contract runs out.
Fans were becoming increasingly worried that the contract of the former Liverpool and Tottenham Hotspur man was going to run out in the summer, and the 31-year-old would be free to walk out of the club if he wished, but Hodgson has today set the record straight.
The Fulham manager has stated that Murphy's contract was going to be renewed if he played a certain amount of games this season, and a new deal therefore seems likely, with the veteran midfielder having been selected as club captain by Hodgson.
The 61-year-old is quoted by Sky Sports as saying, "At the start of last season we offered Danny a contract that would automatically lead to a renewal if he played a certain amount of games.
"That has kicked in and he is here until the end of next season, the summer of 2010.
"He has played week after week. He's gone two-thirds of the season without missing a game, and he might go the last third as well."
Murphy moved to Craven Cottage one-and-a-half-years ago, and has become an integral part of the squad, becoming the club's captain and racking up 59 Premier League appearances and scoring 8 goals in his time in west London.
Nick Turner, Goal.com