Babbel is making good progress in his fight against Guillan-Barre syndrome and yesterday it was announced he had left hospital.
Babbel will be out for the rest of the season, as he continues his recovery.
Parry told the club's official website: "It's nice we've been able to give Markus the comfort and knowledge of a new contract as he makes his recovery."
Babbel, who's original deal ended in 2003, will now be at the club untill 2005.