The 34-year-old has put pen to paper a new one-year deal to extend his stay at his boyhood club.
Last season the fans' favourite scored two outstanding solo goals in the victories over Bolton Wanderers and Blackpool, whilst the away draw at Queens Park Rangers saw Dunn reach a milestone of 350 appearances for Rovers.
Boss Gary Bowyer had made no secret of his intention to keep Dunn at the club and is pleased to see him sign up for another season.
"I'm delighted that he's been able to continue his assocation with the club," said Bowyer.
"I think it is a rare commodity in football nowadays that a player starts at the academy and has a long career at the club.
"His experience will be invaluable this season on and off the pitch, he is Mr. Blackburn Rovers."
A former graduate of the club's youth setup, Dunn made his Rovers debut as an 18-year-old in September 1998. He would quickly progress to be one of the standout midfielders in the country, earning international recognition with the senior England side in 2002.
Aside from a four-year spell with Birmingham City, this new deal ensures Dunn will have spent more than 14 years as a professional at Ewood Park.