Tugay is to sign a new one-year contract with Blackburn to extend the Turk's Ewood Park association into an eighth season.
Tugay expressed recently his desire to end his playing career with the club he joined in 2001 from Rangers and the news will also delight supporters.
"It is great news for everybody," said Rovers chairman John Williams. "Clearly, Tugay has established a strong link with the club."
Williams confirmed that Tugay's new contract also makes provision for a future coaching role.
"It's a playing contract and he will remain part of the playing squad, but there could be an opportunity for him to move into the coaching side of things."