Isted, 24, has been involved with the Hatters' pre-season in games against Hitchin Town, Rochdale and Bedford Town and now pens a new contract to remain at Kenilworth Road.
The 'keeper has gained first-team experience with Chesham, Oxford City and Wealdstone – the latter whom he helped gain promotion to the National League in the 2019-20 season.
Last season he returned to Grosvenor Vale for his third spell with the club, before being recalled towards the end of the campaign when James Shea was ill.
Harry has played twice for the first team since his arrival in 2017 – both in the EFL trophy – and he said: "This will be my fifth year here, so Luton is obviously a club that I hold close to my heart. I really enjoy being here, it’s like my second family, and I always wanted to stay.
"There’s been a little bit of uncertainty, but the offer was always there and since the first day of pre-season I came back knowing that I’m here for another year, and now it’s official I’m delighted.
"I’m 24 now, and I’m at the stage of my career where I need game time to show people what I can do. Whether that’s here or on loan with another club, we'll see what progresses, but I’m ready to play and I’m looking forward to the challenge."
Manager Nathan Jones was pleased to have him back on board to supplement the GK union!
"Harry has chosen to come back and we’re delighted with that because he likes it here. We left it open for him but he wants to still be here, still be around.
"There will come a time where he will have to go out and carve his career but that might not be yet. To be fair to him, if something came up that he couldn’t turn down then he would have had the option of going there or coming back to us. As it was, he told us early that he wanted to come back and we’re delighted he has."