Green, 23, kept five clean sheets in eight games during a loan spell from Guiseley at the end of last season as the Holy Blues narrowly missed out on a play-off spot.
He said: “I really enjoyed my time here last season. I was made to feel welcome.
“I had a couple of other offers higher up but this is a massive year for me and I knew I loved my time at Gainsborough, so I wanted to stay and get promoted.
“I always knew I wanted to be here and if we could do a deal, I was more than happy to stay.
“Gainsborough is a good club and we want to be right up there challenging next season. I’m looking forward to being part of it.”
Green made a solitary FA Cup appearance for Newport County, and has also had a spell with Scarborough Athletic.