The 27-year-old has put pen-to-paper on a new two-year extension that will keep him at the Club until June 2018.
Cotterill, who signed on a free transfer in 2014 has made 48 appearances in all competitions for the Club, scoring 10 goals.
The Welsh international joins Demarai Gray, Clayton Donaldson, Paul Caddis, Jonathan Grounds, Andrew Shinnie and Stephen Gleeson as First Team players to have signed new deals this summer.
Blues boss Gary Rowett says that Cotterill's qualities and ability to create and score goals make him an important member of the squad.
“I think he is enjoying his football," said Rowett.
"In the last couple of weeks I think he has got that brightness back about him and that goal threat, that player who we know can put some great stats and performances together that compares to any winger in the division in terms of his goalscoring and his assists.”