The former Saracens and England second row played in all four straight Tests for Britain and Ireland's elite, featuring in all three internationals against the Wallabies nine years ago and the opening rubber of the following series against the All Blacks.
There had been talk that the 37-year-old might call time on his illustrious career at the end of the current campaign but Grewcock has decided not to hang up his boots just yet.
In addition to carrying on with his role as a player, Grewcock intends to take a greater interest in Bath's work in the community - something that he may continue being involved with beyond his latest contract.
"When you play professional rugby, you can often be seen as just a rugby player," said Grewcock, who won the Guinness Premiership Community Player of the year last season.
"But, as a member of Bath Rugby we all have a duty to the Bath community and the wider community as a whole.
"It is great to be in the unique position where I can do what I love, play rugby, and also be able to help the development of some of the younger players in the Club."
On the pitch, Grewcock has made close to 200 appearances for Bath, in addition to winning 69 caps for his country.
"Danny is one of our most respected players, a model professional who does a terrific amount of work in the community and great example for our younger players," said Bath head coach Steve Meehan.
"Grewy's decision to remain with the squad reflects that he is still enjoying the game and sees a bright future for the team.
"We will be drawing on his experience over the years to come in what we see as a very important appointment for his and the Club's future."