The 28-year-old centre made his debut for the region in 2016 and has gone on to score 13 tries in 57 appearances.
Halaholo, who grew up in Auckland and represented Tonga at under-20 level, qualifies for Wales under residency next season.
“I’m really happy to sign,” he said.
“The welcome I have received since I arrived here has been awesome. My family absolutely love it and this has definitely become our home.
“I’m really excited about what the future holds. We showed our potential last season by winning the European Challenge Cup and with so many exciting young players we can continue building and improving.”
“We have a massive few weeks coming up and it would be an awesome achievement to make the Guinness PRO14 play-offs. That is my sole focus right now but looking further ahead we have a massive amount of potential and I want to be part of that.”
Cardiff Blues head coach John Mulvihill was delighted to retain the hot-stepping centre’s services and believes he can get better and better at the Arms Park.
“Willis is such an exciting player, who has shown what he is capable of with big moments in big matches,” said Mulvihill. “He qualifies for Wales in the autumn and is looking forward to a massive off-season to take himself to the next level and put himself in the frame for selection.
“He has become a really important member of the group and compliments the young players coming through our system and thrives upon that competition. Both Willis and his family are very happy and settled in Cardiff and we are delighted that he has decided to remain at the Arms Park.”
