Howells, who has made 16 appearances and scored five tries over the last two seasons, has agreed new terms to remain at Rodney Parade.
“Daf is determined to kick on as we return to rugby and play his part in helping us move forward,” said Dean Ryan, director of Dragons Rugby.
“His challenge now is to play regularly and intensify the competition we are building for places right across the back-line.”
Brecon-born Howells, who started his career with Neath and had playing spells at Aberavon and Ebbw Vale, moved to Dragons from Ospreys in the summer of 2018.
Howells was selected by Wales in 2013 for the summer tour to Japan and made his international debut in the June of that year.
The 25-year-old joins fellow backs Rhodri Williams, Tavis Knoyle, Josh Lewis, Jordan Williams, Will Talbot-Davies, Owen Jenkins, Rio Dyer, Arwel Robson and new recruits Jonah Holmes and Nick Tompkins in putting pen to paper on deals.
“I’m really pleased and grateful to be given another opportunity to play for Dragons for the coming season,” said Howells.
“It’s been a while since I last played due to injuries so I’m really excited to get back out there and show what I can do.
“I think the progress we’ve made as a team over the past 12 months has been brilliant and I’m excited to be a part of the squad that continues to build on that.”
