The Welshman, who returned to Castle Park for a second spell three years ago when the Knights were fighting against relegation from the second tier, has signed until the end of the 2017-18 season. The former Wales defence coach had previously led the Knights to their best ever finish of third in the second tier in 2006-07, during his first spell.
They are currently second in the Championship, and reached the final of the British and Irish Cup last season.
Club president Tony de Mulder said: “The history of team sports shows that the long-term continuity of management, coaching and the nucleus of players is essential to the success of any team.
“In Clive Griffiths, with his vast experience in the top flight of rugby, we have someone who offers that long-term management and coaching ability.”
Griffiths added: “I would like to thank everyone for keeping faith in me and the loyal support shown both on and off the playing field – these were the overriding factors that contributed to my decision to remain at Castle Park.
“We are growing steadily again and with the current spirit and work ethic at the club, there is great optimism for the future.”