Veteran England forward Defoe has shown that class is permanent after continuing to bang in the goals in the Scottish Premiership.
Aside from continuing his playing career, 38-year-old Defoe will also take his first steps into coaching with this deal.
He told the Rangers website: "It is well-documented how much I love the club and the relationship I have with the fans, the players and the staff at the club.
"So to get the deal over the line, I am just delighted.
"It is something I wanted to happen, even before the season finished, especially the way we finished the season with winning the league.
"It was the perfect time to be at the football club and it was so special, so to sign another contract as a player-coach, and to still be a part of it, it is an amazing feeling for me and my family.
"It is something different and it is something new for me, and first of all, I want to thank the board, Ross [Wilson] and the manager and all the staff that have made this happen.
"It is an unbelievable opportunity for me and it just shows the appreciation I get from everyone at the football club which is the best feeling in the world more than anything else.
"I can imagine once I get started, hopefully I will just flow into it and everything will happen quite naturally."
"It is well-documented the relationship I have with him having known him for so many years.
"I am thrilled that he is going to be passing on his amazing experience and professionalism to the attacking players throughout the club.
"He has shown this season, however, what an asset he can still be for us on the pitch, and I won't be afraid to use him when necessary.
"I look forward to Jermain's return and him beginning his new role when pre-season begins at the end of the month."
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