The 31-year-old former Manchester United and Sunderland full-back is now tied to the Potters until 2013.
Higginbotham has helped Stoke establish themselves in the Premier League since joining them two years ago following their promotion.
However, he has fallen down the pecking order this season, having not started in the league since the opening day.
Manager Tony Pulis told his club's official website: "We wanted to cement Danny's future with the club because he is such a good professional and it is important we look after certain players at the football club who started all this off.
"I've got a lot of time for Danny because he is one who falls into that category.
"He may not be in the side on a regular basis at the moment, but he still has a crucial role to play, as do a number of other players in a similar situation.
"The fabric of a football club is made up of the whole cloth, not bits and pieces, so we are delighted Danny will remain a part of that."
Higginbotham has been restricted mostly to Carling Cup duty this term, having started in every round, including last night's defeat at West Ham.
However, he did come off the bench to make his 200th top-flight appearance in Sunday's loss against old club United.