Manager Simon Grayson told the club website: "We're delighted to have Shane for another year.
"He has done well since he came in and it's good to have competition with Casper [Ankergren]."
Higgs joined Leeds in the summer from Cheltenham and began the season as number one choice in goal.
He has been out of action since the win over Norwich in October, with Ankergren returning to duty in goal.
"Shane did well in pre-season, got his opportunity, and he took it with some good performances and some good saves," Grayson added.
"He is out at the moment, but is making good progress. Casper has come in and he's done well and I'm pleased with the competition we have there because we have two good goalkeepers."