The 21-year-old signed a half season deal with the Blue Square Bet Premier club Gateshead in the summer but has now penned a contract until the end of the season.
Donaldson made five appearances for the Magpies during the 2009/10 campaign.
He played one League Cup game the following season and a dozen games on loan at Hartlepool United in League One.
Gateshead manager Ian Bogie: "We gave Ryan time to adapt following his release from Newcastle.
"He has really blossomed and is a talented footballer with great attributes.
"He did not hit it off in the early games after we threw him in but has been our outstanding performer in recent weeks.
"The goal he scored at Wrexham recently was out of the top drawer, one of the best I've ever seen.
"You don't play for Newcastle United unless you are a good player and he is better than some players currently plying their trade in the Football League.
"We have given him a chance which he has grabbed with both hands. He is playing in a side that plays good football and is enjoying his time at Gateshead.
"It is a good piece of business to keep him at the club and I expect him to go from strength to strength over the next few months."
Source: Newcastle United Mad