Rayer spent two seasons at the Blues as a player before he returned to Goldington Road in May 2005.
The former Wales international has gone on to establish Bedford as one of the leading part-time sides in the country.
And is delighted to have agreed the new contract with chairman Geoff Irvine.
Rayer said: "There has never been any doubt about my commitment to this club and I am delighted to extend my stay for another two years.
"During my time at the club I feel that we have made real progress both on and off the field. The main factor however in this decision is the support I have received from the chairman who has placed a lot a faith in me and we have a great working relationship.
"We do have our 'healthy' discussions from time to time but that is a good thing and long may that continue. It keeps us on our toes!
"This season is another exciting challenge to look forward to and I think that the early signs are that we have established an impressive squad who can hopefully improve upon last season's effort.
"I also want to take a moment to say a big thank you to all of the other coaches at Bedford Blues who contribute so much to the team. It certainly isn't and never will be solo effort at this club and I couldn't do this without the support and commitment of such a good bunch."
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