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.

A section of Victoria Pier in Colwyn Bay collapsed into the sea in February and a fire broke out there in March.
The planning and listed building consent applications have been submitted by the owners, Conwy council.
They include redeveloping a shortened pier and salvaging heritage elements of the structure for potential use in its restoration.
The Colwyn Victoria Pier Trust wants to restore the pier to its original 1900 length, complete with kiosks and a pavilion, but has recognised the remaining pier needs to be dismantled "so the community can move forward".
The 116-year-old pier was already closed to the public for safety reasons before its partial collapse.
The council said the applications would be registered by the planning authority in due course and then be subject to the usual planning process.
Once they have been considered and assessed, the listed building consent application will be submitted to the Welsh Government.
That decision will be made by a Welsh Government minister who will be advised by CADW.
In 2013, Conwy council voted to demolish the pier but this move was refused by the Welsh Government in 2015.
Defender Ryan Dickson has extended his stay at Yeovil Town by two more years.
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Permission has been requested to dismantle and redevelop a Grade II-listed pier in Conwy county.