“Now tougher challenges are ahead as we focus on making our mark on the most competitive league in the world.
‘I’m sure the fans will get behind us as they always do and help make Villa Park a tough place to come and play.
Terry, 38, has impressed at Villa as he studied the trade and has been a positive influence on young players such as Tammy Abraham and centre-halves Tyrone Mings and Axel Tuanzebe.
Villa CEO Christian Purslow added: ‘The Board of Aston Villa is delighted with John Terry’s contribution to our Club in his first year as an Assistant Head Coach.
‘We admire his dedication and commitment to gaining more experience and learning under Dean Smith’s leadership in these formative years of his managerial career.’
Villa face Tottenham in the opening game of the season away from home before welcoming Eddie Howe’s Bournemouth to Villa Park for their first Premier League game at home.