The 26-year-old, who has been one of his country's star performers over the past 12 months, was reportedly offered a AUS $1 million a year contract with the Kubota Spears but has instead opted to recommit to the Australian Rugby Union and the Queensland Reds.
"We've been quietly confident Digby would remain in Queensland," said Reds boss Ewen McKenzie, who led Ioane and co to Super 15 glory earlier this year.
''Obviously we're quite pleased it's finally over. I think he's had an outstanding year.
'He's one of our most popular figures and he has the ability to change games with his enigmatic style of play.
"Digby is a guy who gets a lot of touches every game. He always has the ball in his hands and he has a ridiculous number of game involvements. He gives us a real point of difference."
''That ices the cake for us. We've retained 25 of the 30 contracted players from last year, which is a great position to be in after winning the title and it gives us a good capacity for more success.''
Ioane has become a natural selection for a current World XV in a season in which he played a pivotal role in the Wallabies' first Tri Nations success since 2001.
Australia's shock defeat to Ireland at the recent World Cup coincided with his absence due to a dislocated thumb after a try-scoring performance in the opening win over Italy and his importance to Robbie Deans' side was again emphasised this weekend as he picked up the man-of-the-match award in the 24-18 victory over Wales in Cardiff.