Merrett's new contract, signed after he was omitted from the Lions' "captain's group" this week, will ensure the Gold Coast product remained with Brisbane until at least the end of the 2016 season.
The 28-year-old former vice-captain said the decision not to explore his options as a free agent was an easy one.
"As a Queensland boy, being able to call myself a Brisbane player for life, it's pretty amazing," Merrett said in a club statement.
"I still feel like my best footy is ahead of me and I'm here to help this team get back to the finals.
"I can only see this team improving, particularly with so many good young players, so I'm jumping on the bandwagon early."
Merret has played 135 AFL games for the Lions since making his debut in 2005 after being identified for his raw athletic ability as a teenager.
"Daniel is a great success story for the Queensland talent system," said Lions football operations manager Dean Warren.
"He was introduced to the game late but has developed into one of the competition's best key defenders."
Brisbane begins their pre-season cup campaign on Saturday night against Gold Coast and Hawthorn at Metricon Stadium.