Hudson played seven AFL games for the Magpies and impressed with his efforts to develop emerging youngsters Brodie Grundy and Jarrod Witts.
He managed to combine his playing with coaching this season and was happy to sign for another year to play on as a mature age-rookie in 2014, with expectations similar to this season.
His main role will be to support Grundy and Witts as they develop and step into the breach if required.
Although Collingwood delisted premiership ruckman Darren Jolly on Monday, the Magpies have stuck with the 34-year-old Hudson, who is at his fourth club.
They have been impressed with Hudson's selfless approach and his willingness to support the young players as they learn the game.
Grundy has also shown some of the characteristics that made Hudson such a good ruckman at his peak, following up from the contest and winning clearances.
Speculation continues that the Magpies would seek a ruckman aged in their mid-twenties but AFL.com.au understands Collingwood is confident in its emerging duo and is not desperate to gain a high profile ruckman in that demographic.
Hudson has played 168 games and will turn 35 in February, however he is durable and has ambitions to carve out a coaching career.
The arrangement is seen to be a unique circumstance that suits both parties perfectly.
Along with Jolly, Collingwood delisted Alan Didak and Andrew Krakouer this week.
Didak and Krakouer played 28 games between them in the past two seasons.
Didak's end of season form showed he still had the capacity to play at senior level, but at the Magpies he remained behind their bevy of talented small forwards.
The Magpies will wait on a decision from Dale Thomas about his future as the unrestricted free agent considers an offer from Carlton.
Collingwood played 40 players in 2013 and will continue to regenerate its list.
They are also seeking a replacement for sports science manager David Buttifant who resigned on Monday. The club is considering applicants from both Australia and overseas.
The free agency period does not begin until the Friday after the Grand Final.