The Republic of Ireland youth international, who can play at left-back or left-wing, rose through the ranks at Argyle and signed his first professional contract in July 2008 after impressing in the Pilgrims' FA Youth Cup run.
Manager Paul Sturrock was pleased to capture McCrory's signature for another year.
He said: "Damien went out on loan last season and he did very, very well.
"He played at left back and wide left and won rave reviews.
"That shows the benefit of putting players out on loan. He's now got another year to show me that he merits being given a further opportunity."