Having represented Wales at students, Wales development XV and Wales A level, the 5-times Welsh capped hooker made his senior international debut against Japan in 2001 and went on to feature in Wales' 2007 test squad to tour Australia.
"I've really enjoyed my years at the Dragons and I think this is an exciting time to be involved with the region," said Jones. "We have a strong group of players at Rodney Parade and with a lot of home-grown talent coming through, I'm looking forward to another two years here.
"There is a great atmosphere in the camp and a really strong team spirit."
With captain Tom Willis sidelined with a calf injury for much of the 2009/10 season, Jones grabbed the opportunity, not only to regularly start, but also to captain the Men of Gwent and has proven yet again the value of his experience and expertise.
"We are delighted to have retained the services of Steve for the next two years," said Dragons Rugby Manager Robert Beale. "He is an integral part of our squad and future plans."