Dickson, who has made 57 appearances for Quins since joining the club from Bedford Blues in 2009, has committed his future until the end of the 2014/15 season.
The 30-year-old was called into the England squad last season and played in the second midweek game against the South African Barbarians during England's summer tour.
He follows fellow Quins scrum-half Danny Care in extending his stay at the Stoop.
Quins director of rugby Conor O'Shea said: "For us the scrum half position is fundamental to the way we play and we are very fortunate to have two of the leading scrum halves in the country who buy into everything the team is about.
"I know I speak for all the coaches at the club when I say that Karl is one of the best and most competitive people they have ever come across, his influence on the squad is enormous and the competition between himself and Danny Care is great for both of them. We are delighted with this signing."
Dickson added: "Winning the Amlin Challenge Cup in 2011 and the Aviva Premiership last May, together with a number of outstanding performances such as the away win in the Heineken Cup in Toulouse, shows the potential of the current Harlequins squad."
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