Urwin, 20, originally joined the club on a non-contract basis early last month but he has now signed a fresh one-year deal with the Bantams this week.
Urwin's contract also has the option for a further year's extension in it, which is favour of the club.
The former Blackburn Rovers shot-stopper has been on the bench for both of City's Capital One Cup ties so far this season.
Urwin becomes the second 'keeper in recent days to commit his future to the Bantams after fellow custodian Ben Williams signed a new deal to keep him at Valley Parade until the end of the calendar year on Monday.
Bantams boss Phil Parkinson said: "Matt gives us good competition and is someone who we could look to send out on loan to get a bit more experience."
Parkinson also confirmed after City's Johnstone's Paint Trophy tie at Oldham Athletic that the club are in talks with Filipe Morais regarding a new contract after his short-term deal expired on Sunday.
Italian Raffaele De Vita, who played for City last year, won't be returning to the Coral Windows Stadium, however, after featuring as a trialist during the summer in a bid to prove his fitness.