The former Chesterfield boss, who helped keep the Pilgrims in League Two, will now begin preparations for the 2013/14 campaign while the finer details of his appointment are ironed out.
Sheridan met with Argyle owner James Brent and both parties are confident that a deal will be finalised in the next few days.
"Further announcements regarding John's position and the playing squad for 2013-14 will be made as and when appropriate," a club statement read.
"Top of his priorities is to assess and make decisions regarding the playing squad for the new campaign, which John will be addressing this week.
"Everyone at Home Park is thrilled that John is staying with us, pledges their full support to him, and wishes him every continued success as Plymouth Argyle manager."
The Republic of Ireland international took over in early January and was named the League Two Manager of the Month for March as their form picked up during the run-in.