Mills joined the Exiles in 2007 and last season the forward led them to promotion to the Aviva Premiership for the first time in their history.
The 28-year-old came through the academy at Bath and has also had stints at Llanelli, Llandovery and the Scarlets, while he represented Wales at underage levels.
"I want to stay at London Welsh for as long as I can," said Mills, who has made 162 appearances for the club.
"I've been here for a long time already and I look forward to more success in the future.
"To see the club where it is now, its vision for the future and the calibre of players we have is fantastic.
"We now want to really establish ourselves in the Aviva Premiership. That's the next challenge."
London Welsh head coach Lyn Jones said: "Jonathan has stepped up to Premiership level and has performed to a consistent standard.
"He has led by example as captain and has shown that when he's on the field he's a true Premiership player."
Prop forward Joly has made 12 appearances for Welsh since joining from Bourgoin, and has represented France at Under U20 level and was selected for the 2007 IRB Under-19 World Championships.
"Arthur has proved himself to be a very popular member of the squad, impressing all when he's played," added Jones.
"He's still a young French prop who has a huge amount to learn about the game, but he's got the basics in place and he's going to prove a very good signing for London Welsh."
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