Kozluk, 31 would have seen his contract with the Oakwell club expire on 30 June 2009, but has opted to remain at the South Yorkshire club for a further twelve months at least - whilst also turning down a three year deal with Crystal Palace; who is managed by his former boss Neil Warnock.
He told BBC Radio Sheffield: "It's fantastic to be staying because I never wanted to leave. The fact I turned down a long contract at Palace shows my commitment to this club. I'm confident that we can be successful next season."
The full-back signed for the Blades in March 1999 from Derby County - joining as part of the deal that took Vassilis Borbokis to the Rams whilst Kozluk, and Jonathan Hunt arrived in the opposite direction.
He made his Blades debut on 13th March in a 3-2 win at Tranmere Rovers and during his time at Bramall Lane made 215 (+21) appearances, scoring twice. He left the Lane when his contract expired in July 2007 to join Barnsley.