Turner agreed the deal, which lasts until May 2010, after holding talks on the future of the region with chief executive Gethin Jenkins.
The Dragons, who have a new stadium in the pipeline, are determined to keep developing local talent.
"I am proud of what we are doing here at the Dragons and representing the area I grew up in," said Turner.
"The coaching team and myself have worked hard to develop local talent and I am glad that I have been given the opportunity to continue this development.
"I am aware of the financial constraints we face but we are developing plans to blend our exciting emerging talent with some experience in order that we can continue to grow as we head to the new stadium."