The 36 year old's contract was due to expire at the end of this season, but had been promised one by Neil, Warnock should Rovers no-longer require his services.
"I am delighted Craig will be with us next season, he is a proper player and a true professional," stated Rovers manager Graeme Souness on the club's official website.
"He is a great role model for younger players and wonderful to work with. You can never have too many like him round the place."
Short added to Souness praise; "It will be my sixth year here, the longest I have ever been at a club, but it is also the happiest period of my career," explained the stopper.
"We had to get the season sorted out first and I was not going to talk to anyone else until I knew what the situation with Blackburn was."
He added: "This season didn't start off too well with me being injured but it's turned out okay and hopefully we can look forward to a great campaign next year."