The new deal will secure Jetta's stay at the Demons until the end of 2016.
Melbourne football manager Josh Mahoney said Jetta thoroughly deserved his new contract.
"This is a great reward for Neville," Mahoney told AFL.com.au.
"His form this year has been outstanding and he plays exactly the way we want him to play. He's competitive and he has become very reliable down back and has played on a number of very good players and beat them.
"We look forward to him improving even further after another good pre-season and we think he’ll be an important part of our backline moving forward."
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Jetta, who was delisted by the Demons at the end of last season and then re-drafted as a rookie, has made the most of his opportunities since being promoted to the senior list in round five.
The 24-year-old has taken some big scalps as a negating defender this season including Brandon Matera, Eddie Betts, Luke Dahlhaus, Chad Wingard and Jamie Elliott.
After spending his first five years at the club as an inconsistent small forward, Jetta has thrived in a defensive role where his one-on-one contested work has come to the fore.
His ability to back himself in aerial contests has also added another layer to his game.
Jetta laid a game-high 10 tackles against Hawthorn last week to demonstrate his aggressiveness at the contest, and he told AFL.com.au in June that he was relishing his positional change.
"My role is more typified now," Jetta said.
"Early in my career I wasn't going out to play with a simple mindset like I am now."
Jetta has played 54 AFL games since being drafted with pick No. 51 in the 2008 NAB AFL Draft out of Swan Districts in Western Australia.
