if I go to Mexico how will I re-enter the US since my earlier H1b stamp is no longer valid

You may be able to re-enter with your valid H-1B extension approval notice if you do not go to any other country other than Mexico and return within 30 days of departure, depending on your country of nationality.

You may want to get the H-1B visa stamped in your passport at an American consulate in Mexico, after you make an appointment for an interview. In either event there is always the possibility that you could be denied readmission to the USA, but, if you have not violated the US immigration laws, you should be readmitted.

You will want to consult with an experienced immigration lawyer to obtain more detailed information

The previous answer is correct, but it does present some risk that you might not be readmitted. It would be safer to apply for the new visa stamp before you return, but you shoudl consult an immigatio attorney about the likelihood that you could get a new visa in Mexico. One factor to consider is whether your first H-1B visa was issued in your home country - if it was, then a US consulate in Mexico will be likely to issue you a new H-1B visa stamp, but if it was not, for example, if your country of nationality is India and your initial H-1B visa was issued at a consular post in the UK or Canada, then you would not be able to get a new H-1B visa stamp in Mexico.