James, the region's top try-scorer, has been in fine form in the opening weeks of this season, taking his tally to 51 and scooping the man-of-the-match award against Glasgow Warriors.
He had no hesitation over agreeing new terms with his home region and is relishing the season ahead.
James said: "As soon as I came back from the Wales tour of New Zealand and my agent began talking with Cardiff Blues, I couldn't get the deal signed quick enough.
"I left because I wanted to test myself in a new environment and improve as a player. I was very happy to come back ahead of last season and I feel I came back a better player.
"I've been really pleased with the way things have gone and I bit Danny's hand off when he offered me this new deal.
"We are heading in the right direction and really building something here, this is the strongest squad we have had since we were reaching Heineken Cup semi-finals and winning the Amlin Challenge Cup, and I can't wait to play my part."
James burst onto the regional scene in 2006 and has since made 136 appearances for the Blues.
The Merthyr-born ace was already signed up when head coach Danny Wilson arrived in 2015, but he was delighted to have such an explosive attacker at his disposal.
Wilson said: "Tom is a superb player and has shown exactly what he is capable of in the opening weeks of this season.
"He is fast, powerful, defends well and does the basics well. He is a key player for us and will be an important part of what we are trying to build here.
"I'm delighted we have been able to secure one of the in-form Welsh players to a new, long-term contract and hope there are many more performances like we have seen so far this season to come."
