Dunn, who has been a crucial cog in Melbourne's resurgence this season, was an unrestricted free agent but he is now tied to the club until the end of the 2017 season.
The 27-year-old said he was excited about Melbourne's prospects under coach Paul Roos and he hadn't considered moving through free agency.
"It was never really on my radar, but I think it’s an important thing to have in our industry," he told melbournefc.com.au.
"It’s a nice thing for players to have the freedom and ability to move clubs if their careers aren’t going that well at the club they’re at.
"I’m one of the delegates for the AFLPA at our footy club and [free agency] is pretty important for where the game’s going from a player’s point of view.
"I’m going to be an old man by the time I’ve finished playing here now, which is good."
Dunn, who has played 127 matches since making his debut in round six, 2006, said maturity was responsible for his form spike this season.
"I’ve got my footy now to a level where I’ve bridged the gap with my consistency," he said.
"As a younger player, I struggled between my best and my worst footy.
"I’ve worked hard to bridge that gap and I think now I know myself better as a person and as a player. That’s part of reason why I’m playing consistent footy at the moment."
Added to the leadership group earlier in the season, Dunn said he had thrived on the opportunity.
He said the Demons were looking forward to their "biggest game of the year", taking on Collingwood in the Queen's Birthday clash on Monday.
"Hopefully all of the Demon faithful come out and get around us," he said.
"The boys have been playing some pretty good footy.
"A few more wins would be nice on the board, but it’s not to be and I’m really excited for Monday."
Twitter: @AFL_Nathan
