The 30-year-old had been linked with a switch to Gold Coast on a long-term deal, but Heppell has agreed to stay at Tullamarine.
Heppell, who has played 213 games since debuting in 2011, took over the Essendon captaincy from Jobe Watson ahead of the 2017 season.
Despite re-signing with the Bombers, the former Rising Star winner is no certainty to add to his 107 games as captain.
Essendon are in the process of hiring a new coach to replaced Ben Rutten, who was axed after the club board's botched attempt to lure four-time Hawthorn premiership mastermind Alastair Clarkson.
The Bombers have interviewed a number of candidates, including club great and former Essendon coach James Hird, who was at the helm during the controversial supplements saga.
Essendon are expected to announce their new coach by the end of September.
"It has been one of the greatest honours of my life to captain the club I grew up supporting," Heppell said.
"The Essendon football club is my second home, and to see out my playing career here as a one-club player is incredibly special.
"Although this year has been tough, I have real belief in our playing group and I'm committed to continuing to support the growth of this program.
"I look forward to working with our new coach and putting in a big pre-season together as we build towards 2023."
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