The 36-year-old Iceland defender, who recovered from a career-threatening Achilles injury to make 29 appearances for Pompey last season, has put pen to paper on a one-year deal.
Pompey chief executive David Lampitt said: "We are delighted to have Hermann back for another season.
"Last season Hermann showed great commitment in his return from a serious injury. He embodies everything that is great about Pompey.
"He's been a big part of this club for the last four years and we're delighted to have him back.
"His experience, passion and ability to lead will no doubt continue to benefit the side next season."