The 34-year-old midfielder has put pen to a short-term deal that will see him remain at the Ricoh Arena for the rest of the 2015/16 season.
Former West Ham United, Chelsea, Liverpool and Lille man Cole initially joined the Sky Blues on loan from Villa in October and will now stay put with the League One club until at least the upcoming summer.
Coventry boss Tony Mowbray was delighted with the transfer, telling the club's official website: "Since he joined the club, I've really enjoyed working with Joe and delighted to see him sign on for the rest of the season.
"Our staff have worked hard with him to build up his fitness and physicality, and we've seen Joe really buy into what we're trying to do here.
"He's great to have around the dressing room and the rest of the squad feed off his experience, and I'm sure it'll have a positive impact on our younger players as well.
"I only see his performances for the club getting better and he is a fantastic option to have from now until the end of the season."
Cole, who has played seven times for Coventry, has been joined by former Newcastle United, QPR and Crystal Palace defender Peter Ramage who joins the Sky Blues as a free agent from Indian Super League side Kerala Blasters.
SIGNING: Joe Cole joins the #skyblues until the end of the 2015/16 season! More: https://t.co/zk561Lzrsf#PUSBpic.twitter.com/WjzQUD2iJD
— Coventry City (@Coventry_City) January 7, 2016