The 41-year-old Lidstrom, who was second among NHL defensemen with 62 points (16 goals, 46 assists) last season, had been undecided on whether to return for another season after the Red Wings were eliminated in the second round of this year's playoffs.
"Obviously, it's an important decision for our hockey team," Holland told The Detroit News. "Nick is coming off a great tremendous year and continues to be one of the elite defensemen in the game."
"I wanted to make sure I found the motivation and was ready for the workouts over the summer," Lidstrom added. "Preparing for a long year, you have to start now and work out even harder to keep up. You can't cut any corners."
Lidstrom will earn $6.2 million in 2011-12, as he did last season.
The Swede has 253 goals and 855 assists for 1,108 points in his career with the Red Wings.