Elliott has become an integral part of the Blues squad since moving to St Andrew's from Burnley during the summer of 2011.
The 34-year-old made 47 appearances and netted nine times last season to add to the six goals he scored from 40 outings in the 2011/12 campaign.
Birmingham boss Lee Clark told the club's official website: "I'm delighted we have got Wade back. He was a really important member of the team last season. He worked very hard for the team and scored some valuable goals.
"He is fantastic example to the younger players and I really wanted him to be part of this season, so it's great to have him back."
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