The new deal will keep Delaney at Ipswich until the summer of 2014.
“I’m obviously delighted that everything is done and dusted now with the contract and I’m looking forward to spending at least two more years here and helping the club reach the Premier League,” Damien told the club’s official website.
“I came here to win promotion and that’s the aim. I believe we can do it and I wouldn’t have signed a new deal unless I felt that.
“There is a lot of optimism about the place and the results have shown that recently. There are too many positives, too much optimism to walk away from Ipswich Town.
“I tend to follow my gut instinct and everything was telling me to stay here and be part of a club that is moving forward.”