The Republic of Ireland international will continue her stay with her childhood team, where she has already completed five years of service.
An experienced centre-back with a wealth of know-how, Fahey has so far made 106 appearances for the Reds, a total that puts her behind only defensive teammate Gemma Bonner in the current squad.
Fahey led the team back to the Barclays Women’s Super League by lifting the FA Women’s Championship title in 2022 and made 15 appearances as they consolidated their place in the top tier with a seventh-placed finish last season.
“It was an easy decision and I’m delighted to extend my contract at this fantastic club – I couldn’t imagine being anywhere else,” she told Liverpoolfc.com.
“I’m already massively excited for next season. I’ve been here five years, seen a lot of changes, but the position we’re in now as a club is really exciting and the future looks really, really bright.
“I’m delighted to be a part of it and keep pushing the club higher up the table.”
Manager Matt Beard added: “Niamh’s a fantastic person, a fantastic leader, and her performance levels on the pitch have stayed consistently high for club and country.
“She’s our captain and we’re delighted she’s decided to extend her contract.”
Injury hampered Fahey in the final two months of last season but she was back in time to help Liverpool complete their league programme and believes the squad showed they could compete in the WSL.
She stated: “It was a good year and we showed we’re definitely able to compete against the top sides. The WSL is where you want to be and it’s where we should be. Now it’s about pushing forward and getting us as high up there as possible.”
Fahey paid tribute to the club’s supporters, with Prenton Park becoming a stronghold for the Reds during their league campaign.
“The fans were incredible last year. They always have been, they had our backs even in the toughest times,” the defender said.
“That makes all the difference for us and makes the club what it is, it’s so special because of the fans. We’re delighted they’re experiencing some good times in the WSL and hopefully we can give them a lot more next year.”
Fahey and her Irish colleagues are currently involved in a pre-Women’s World Cup mini-camp and, selection permitting, she’s set for her first major tournament with her country.
She noted: “It’s a big summer ahead for the girls in green, our first ever major finals down in Australia and New Zealand. It’s an historic moment and hopefully I’ll be part of that final squad heading there.”