The 21-year-old used his Twitter account to confirm that he had decided to remain in New Zealand's capital for the 2014 season because he felt the Super Rugby team had "unfinished business".
The Blues have struggled to find a game-breaking fly-half since Carlos Spencer left the team in 2005 and their coaching staff of John Kirwan, Graham Henry, Mick Byrne and Grant Doorey had been reported as a major incentive to move for Barrett.
His older brother Kane also played for the Auckland team this season.
Barrett made the All Blacks in 2012 and, while he currently sits behind Daniel Carter and Aaron Cruden in the national pecking order, some view him rather than Cruden as the long-term successor to Carter.
Barrett's decision is expected to clear the way for former New Zealand rugby league captain Benji Marshall to move to the Blues, with the Herald reporting the 28-year-old Wests Tigers player will be unveiled by the Auckland side on Saturday.
Marshall's jinking running and ball distribution would help reinvigorate crowds and unleash an exciting backline at the franchise in New Zealand's largest city, although he might find the lack of space in the 15-man code a challenge.
Rugby union has successfully incorporated league-style defensive structures into their game and Marshall's cross-field running style would be quickly crowded out at fly-half.
The Blues are expected to give him time to bed into the game either playing at full-back or inside centre, even if Kirwan's first choice inside centre Francis Saili and fullback Charles Piutau both made the New Zealand squad this year.