The powerhouse second row - who stands a menacing 6ft 6in and weighs 18st 13lbs - came through the Pontypridd Academy before playing for Celtic Warriors. Reed later joined the Scarlets and made 109 appearances for the region.
The 26-year-old was named in the Wales training squad in 2011, ahead of the Rugby World Cup, and made his international debut against Scotland in February 2012 as a replacement.
Reed went on to play against the Wallabies in the autumn Tests at the Millennium Stadium and was part of the 2013 Six Nations winning squad. He toured Japan with Wales in 2013.
Director of Rugby Phil Davies said: "I have known Lou since he was 19, when he was at the Scarlets, and have always valued him as a character and a powerful and destructive player.
"I'm delighted that he's re-signed for us. I don't think we've seen the best of Lou yet and there is much to come. He knows this is a massive two years for him and he needs to make the impact we know he is capable of.
"We've had two years of change at Blues, from the playing personnel to the coaching set-up, and over these next few years we need the likes of Lou Reed to be a big part in driving us forward as a group."
Reed added: "I'm naturally pleased to get the new contract. I haven't played as much as I would have liked this season due to injury so you do wonder about your future. But the Blues have stood by me and now it's about repaying that faith.
"I'm back training now and I want to do a job the rest of this season and beyond. I'm looking forward to playing a big part at the Blues as we strive to achieve the big targets and ambitions we have set for ourselves."