Young finished the campaign as first-choice centre-back but could not help steer the Fifers back to the Championship as they lost out to Cowdenbeath in a play-off.
The youngster has already played almost 40 times for the Fifers and, with the departure of Callum Morris this summer, is expected to feature heavily again next term.
Manager Jim Jefferies said: "Kerr wanted time to go away and think about it but I'm happy to say he has now agreed to stay for another year."
"He finished the season strongly and kept some more experienced players out of the team with his performances and hopefully he will continue developing as a defender next season."
Meanwhile, Jefferies is now optimistic of securing another loan deal for Ryan Scully after the keeper penned a new contract with Partick Thistle yesterday.
The 21-year-old spent the whole of last season on loan with Dunfermline and talks have already taken place about a repeat agreement for next term.