The 29-year-old forward, who joined the Rhinos straight from school, was the only remaining out-of-contract Leeds player not to sign up for 2014, but he has now agreed a two-year deal.
Bailey, who is one of only five players to have appeared in all six of the Rhinos' Super League Grand Final triumphs, had been linked with a move to Brisbane Broncos and he said there had been offers from more than one NRL club.
"This was a big decision for me and something that I had to think hard about," said Bailey, who has made 287 appearances for the Rhinos since making his debut in 2002.
"I would like to thank all the NRL clubs who made offers to me and it was nice to know that they thought I could do a job for them down in Australia.
"However, this is my hometown club and I have spent my entire life here. The club have been loyal to me and I think I have been loyal to them in return.
"Leeds Rhinos are my second family and I am probably happier and more settled now than I have been at any time in my career.
"It was stressful dealing with the contract side of things but that is sorted now and I can look forward to getting back fit and finishing the season strongly."
Bailey's decision to snub the NRL comes just two days after New Zealand Warriors snapped up two 18-year-olds from the Rhinos.
Jordan Baldwinson and Mason Tonks were both out of contract at the end of the season and have agreed 12-month deals with another year's option to join the Warriors' Under-20s team for 2014.
- Sports & Recreation
- Leeds Rhinos