Bennett, 29, has enjoyed an outstanding season, scoring eight tries in 15 games and winning a Scotland recall after a three-and-a-half year absence.
He has flourished under new coach Mike Blair, enjoying a freedom to attack that was seldom seen under Blair’s predecessor, Richard Cockerill.
Blair said: “I’ve absolutely loved working with Mark this season. He’s really come into his own as a leader and we’ve been really impressed with the way he’s carried himself around our younger players too.
“We all know Mark is a threat with ball in hand and that’s been more evident than ever this season. His work rate around the park is exceptional and he’s playing with a smile on his face too which is really important.
“We have a lot of young Scottish players developing into the team, so having smart, experienced guys like Mark is absolutely vital to the way we play. He’s going to have a massive role to play in both the 1872 Cup decider and URC play-offs.”
Bennett said: “I’m really happy to be staying at Edinburgh Rugby. It’s a great place to be, we are playing some brilliant flowing rugby and building a great home at DAM Health Stadium. I wouldn’t want to be anywhere else.”
Edinburgh face Glasgow Warriors at BT Murrayfield on Saturday in the second leg of the 1872 Cup.