The franchise announced late yesterday it had signed Smith for another two years, through to the end of the 2016 Super rugby competition.
The signing is a major boost to the Highlanders, who get to hang on to one of their key players.
There had been speculation Smith was looking elsewhere but, in a statement issued by the Highlanders last night, it was revealed Smith had not talked to any other franchise.
Smith, who plays his provincial rugby for Manawatu, said he enjoyed living in the South and simply did not want to look elsewhere.
''I love living and playing rugby in Dunedin. It's my home and I couldn't think of a better place to be.
"I love the team and can't wait to get back out on the field in front of our home fans in 2015,'' he said.
The 25-year-old has been in outstanding form all year and is considered by many to be one of the best halfbacks in the world.
His play this year has seem him skip clear of other halfbacks around the country and he was a major reason in getting the Highlanders into the playoffs this season, the first time in 12 years.
Smith, who brought up his 50th cap for the Highlanders this season, and played every game for the team, had signed with the New Zealand Rugby Union late last month, but no announcement of his signing with the Highlanders was forthcoming at the same time.
That led to speculation Smith was considering other offers and there were thoughts the Blues were sniffing round.
But Highlanders general manager Roger Clark said that was not the case and it was simply a logistical issue to getting Smith to sign.
''There has been a lot of speculation over the past weeks regarding Aaron's future,'' Clark said.
''I want to emphasise that Aaron has been fully committed to the Highlanders from the beginning of our negotiations and did not consider another Super rugby team at any stage.
''The reason New Zealand rugby and the Highlanders' announcements of Aaron recommitting didn't coincide was due purely to the process the Highlanders needed to go through internally for sign off.''
Clark had always been confident of bagging his man but would not announce any signings until pen was put to paper.
''It is great to be able to officially confirm Aaron will be a Highlander for the two years.
"We have made great progress as a team this past season and, as a senior player, Aaron is vital to the continuation of that success.''
With the signing of halfback Smith, the Highlanders have all their key backs returning for another season.
Ben Smith has committed to the franchise until 2017 and boom centre Malakai Fekitoa has another year to go on his contract, as do wingers Richard Buckman and Patrick Osborne.
• The Crusaders announced yesterday they have signed big Fijian winger Nemani Nadolo for another two years.