The 25-year-old arrived in January as a free agent after his contract with MLS side Houston Dynamo expired.
He impressed during an initial trial spell with Bolton and was handed a deal, which has now been extended to 2013.
The Scottish-born America international, who began his career with Sunderland before moving to play in MLS, expressed his delight at signing his new deal.
"I'm really excited because I love being at the club. I couldn't ask to be around better fans, management staff and players," Holden told the club's official website.
"I was given an opportunity by the manager (Owen Coyle) to show that I can play at this level and I'm extremely grateful for that. The confidence that he has shown in me has really allowed me to push on."
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