The back row forward began his London Welsh career with an unbeaten four game loan spell from the Scarlets in January 2007, before making the move permanent the following summer.
He made his 100th league appearance for the Exiles in the club's victory at Leeds Carnegie on the opening weekend of last year's Championship season. But Mills would endure an injury interrupted season, before making a timely return to guide the Exiles through the play-offs.
In total, Mills has made 141 appearances for London Welsh, scoring 11 tries. He took over the captaincy in 2010.
"I'm very happy to keep doing the job and delighted that Lyn thought I did a good job last season," said Mills.
"The captaincy brings out the best in me. The way I play, I lead from the front anyway and hopefully it inspires the other boys to an extent. I've experienced lows during my time with the club, but it's moving forward now and it's really exciting times.
"The standard of players we're signing and who want to come to the club shows how far London Welsh has progressed, and hopefully it will keep getting stronger and moving forwards.
"You can't really believe where we've got to. When I first joined the club it was fighting relegation. To now be in the Premiership is very special."
London Welsh head coach Lyn Jones said: "Jonathan performed well last season on his return to the side. He's a good leader on the field and he deserves the opportunity to captain London Welsh in the club's first year of Premiership rugby."