Tovey is the record points scorer for the region, with 981 points in all competitions, with his best return of 215 points coming for the Men of Gwent in season 2013/14.
The 29-year-old – who has made a total of 170 appearances for Dragons - re-joined the region on permit from Cross Keys earlier this season.
He has now signed a contract until the end of the campaign and been registered for the remaining European Challenge Cup games.
“I’m pleased to get a deal and to secure my future at Dragons until the end of the season and to help us move forward,” said Tovey.
“I’ve enjoyed being back in the set-up and excited about what we can achieve in the coming months.”
Interim Head Coach Ceri Jones added: “Jason has been absolutely fantastic since he has come back into the set-up and so we’re pleased we can now work with him the rest of this season.
“Jason not only adds more competition at fly-half but also brings vast experience to help the younger players at the region develop.
“He has achieved a huge amount already during his time with Dragons and know he is keen to kick on once again in the coming months and help us develop as a squad.”
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I’ve enjoyed being back in the set-up and excited about what we can achieve in the coming months
