Flanker Mills has been with the Exiles since joining from the Scarlets in the summer of 2007, after a successful loan spell the previous season.
"I love the club; I've been here so long that I feel part of the furniture," said Mills. "London Welsh is very special to me and I've got a lot of very happy memories here."
He added: "I've made friends for life and everyone has always been great to my wife and I, while on the rugby side it's great that we've taken the club to the Premiership."
Mills has made 141 appearances for Welsh, scoring 11 tries.
The Wales age-grade international led the club to promotion to the top flight last term, and is looking forward to the challenge of skippering the side in the Aviva Premiership.