Wilkinson has signed a one-year extension to stay with Toulon until the end of next season, with the option to stay a further season beyond that.
The 30-year-old, who started all three Tests for the Lions nine years ago and a further two in 2005, has been a huge success for his new club.
Wilkinson has become a fans favourite following consistently impressive performances in the Top 14 and Amlin Challenge Cup.
"I'm really happy here," Wilkinson told AFP following Toulon's 33-19 win over Montpellier.
"The team is fantastic. It's really great: the players, the coaches, the people, the Mayol stadium.
"It's a pleasure and I hope that all will go well. I have a lot of ambition for Toulon."
The current leading scorer in the Top 14 with 177 points to his name, Wilkinson has helped Toulon climb into fourth position and a potential spot in the end-of-season play offs.
His time in France has also seen him re-establish himself as England's first-choice fly-half.
Wilkinson is currently training with his country in Portugal and is a heavy favourite to start the Six Nations opener against Wales on February 6.