Dickson, 29, made 42 appearances last season, scoring winning goals against Accrington and Mansfield as the club finished 19th in League Two.
The left-back initially signed on a one-year deal from Crawley at the beginning of the season, with the option to extend by a further year.
He told the club's website: "It would be silly not to stay on board. The club is now heading in the right direction."
Yeovil, who for a large part of the season were battling relegation, finished 14 points clear of the bottom two.
Dickson added: "Everyone at the club has worked so hard to create a togetherness and positive atmosphere, which has driven us all forward in such a short space of time."
Dickson signs a two-year deal similar to goalkeeper Artur Krysiak who put pen to paper on Tuesday, and defender Nathan Smith, 29, who signed a one-year contract extension yesterday.
Defender Ryan Dickson has extended his stay at Yeovil Town by two more years.