The 36-year-old will hope to add to his 84 test caps and earn selection for a third World Cup in France, having featured in the 2015 triumph in England and the run to the semi-finals in Japan in 2019.
"Thank you to Pōneke FC, Wellington, the Hurricanes and the All Blacks for giving me my dream job," Coles said in a statement on Thursday.
"I'm looking forward to enjoying the year and creating some new memories."
A tough and abrasive competitor, Coles's grip on the number two jersey has loosened in recent years but he has remained the All Blacks' go-to man in tight second halves and a consistent nuisance for opposition teams with his niggle and chat.
His 100 points from 20 tries have him equal third with Ardie Savea on the all-time scoring list for All Blacks forwards, behind Richie McCaw (135) and Kieran Read (130).
In 2016, he captained the Wellington Hurricanes to their first Super Rugby title, playing through the pain of rib cartilage damage in the final.
"Dane is 100% committed, loves his family, loves his rugby," said All Blacks coach Ian Foster.
"And there is no doubt about his absolute commitment to the Hurricanes and the All Black jersey."
