Also reappointed is Eoin Cahill who will continue his role as backs coach.
Shannon's Chairman Jack Keane detailed the thoughts of the club and the process involved, stating: "Obviously we didn't quite have the season we would have hoped for at senior level, but we still have confidence in both Stephen and Eoin as our coaching team going forward.
"We were dealt a series of blows in relation to our squad, even before the season started and again during the year.
"Our review was carried out in a thorough and frank manner, and between all participants we have identified a few areas where we all feel will benefit from improvements."
He added: "Stability was a key concern for us as we look ahead, and we are delighted that both Stephen and Eoin will continue in their roles in the club."
Shannon needed a surge at the end of the season to ensure their status in Division 1A after beginning the Ulster Bank League with a three-match winning run.
Former Munster, Leinster and Ireland 'A' back rower Keogh reflected on his reappointment and the season as a whole.
"I'm delighted that the club have given be a vote of confidence and allowed me work with the squad from another year," he said.
"I know that the results didn't match the high expectations of the club, but for a variety of reasons we had a tough year.
"We are already looking to strengthen our squad, but I can't speak highly enough of the lads that soldiered last season.
"We were forced to bring up a good few Under-21s and their experience at the higher level will stand us all in good stead."
Shannon will begin next season on Saturday, August 25 with a Limerick Charity Cup match against Thomond.