The jet-heeled wing was out of contract in the summer but has penned a new deal with the Cardiff-based region.
The news will be a major boost to both the Blues and Wales with the lure of big-money moves to France ever-increasing.
"I'm really pleased to have extended my stay at the Blues," said Halfpenny.
"It's a great club and I had no doubt that this is who I wanted to sign with and happy that we have come to an agreement.
"I've not been tempted to play anywhere else as it's a very ambitious club and the quality players we have here, with some good youngsters coming through, the future looks very bright.
"You couldn't ask for better training facilities, which are fantastic and for me there's no better place for a rugby player to be.
"We are seeing the Welsh talent coming through and it's great that they have decided to stay with the region.
"We won two titles in the last two years but we still have ambitions of winning more in the future which is why most of the players have extended their contracts."
Fellow Welsh internationals Bradley Davies and Chris Czekaj are also among the group to have extended their stay at the Cardiff City Stadium Dafydd Hewitt, Josh Navidi, Andries Pretorius and James Down.
"It's been well documented that we have to be sensible with our budgets and making sure that we are not overstretching ourselves financially," said Director of Rugby Dai Young - a Lions legend with three tours to his name.
"However, that doesn't mean that we don't have ambition, we want to be up there pushing with the big guys.
"Obviously it's important that we retain our quality players, as we look to rebuild, as all teams do."