Jones made his debut for the Ospreys in 2005, appearing more than 150 times for the club and captaining the side since 2010.
A veteran of both the 2009 Lions tour to South Africa as well as the 2013 trip Down Under, Jones has also won two Grand Slams with Wales in 2008 and 2012.
"I'm very happy to be able to resolve my future, which means I can now concentrate solely on my rugby," he said.
"It's flattering to have received offers from elsewhere, but at this point in my career my focus is on being in the right environment to ensure the longevity of both my domestic and international career.
"It's important to me that I'm playing the right level of rugby to ensure I am at my best, which is why it makes sense for me to accept the offer on the table from the Ospreys."
Ospreys rugby operations manager Andy Lloyd said the news would give everyone involved with the region, from the players and staff to the supporters, a huge boost.
"Alun Wyn has been, and continues to be, a fantastic servant to this region and is a true role model to those around him," he added.
"A natural leader, he demands the highest standards of himself and everybody in this environment, and it will be a better place with him around in the coming seasons."