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Mills, 24, can only play the 20-over format because of a back condition, and recently appeared in the Indian Premier League after being bought for £1.4m.
He made his England T20 debut last  July and played in all three games against India at the start of 2017.
"Ever since I joined the club I've been welcomed with open arms and I now fully regard Hove as my home," Mills said.
"Even throughout all of my injuries when I first joined the club, the level of support I have received has been outstanding, and I am looking to repay that support over the next three seasons."
Mills joined Sussex ahead of the 2015 campaign and was their leading wicket-taker in last season's T20 Blast with 15.
He has since played in equivalent competitions in Bangladesh, New Zealand, Australia and Pakistan, before heading for India to represent Royal Challengers Bangalore, who finished bottom of the eight-team table with just three wins from 14 games.
Sussex director of cricket Keith Greenfield added: "We are looking to create an exciting and dynamic T20 team for years to come, and Tymal is an 'X-factor' cricketer who fits the bill in achieving that goal."
England T20 fast bowler Tymal Mills has signed a new two-year deal with Sussex to the end of the 2019 season.