The 29-year-old, who joined the Owls from Stoke in January 2009 following a loan spell, has put pen to paper on a two-year deal.
Buxton, voted player of the year at Hillsborough this season, told the club's official website: "I'm delighted to sign here.
"I've enjoyed my time at the club and I'm pleased it's all been sorted early so I can look forward to my future here and the new season.
"The supporters here are top class and I would like to thank them for all the support they have shown to me and for voting me as their player of the year.
"It means a lot to me to remain here and be one of the longest serving players at this club because it is a fantastic place to play your football."
Buxton was a virtual ever-present in the side last season, making 44 appearances as the Owls secured another season in the Championship with a last-day win over Middlesbrough.