News of Mundy's commitment comes just two weeks after that of his captain Matthew Pavlich, who also signed for four years.
The 25-year-old is now tied to the club until the end of the 2014 season.
The durable Mundy has missed just two games since his debut in round six 2005 - both this season - and he collected nine Brownlow votes this year, equal with captain Matthew Pavlich and behind just Aaron Sandilands and first-year sensation Michael Barlow.
Mundy, who was a second round selection (19 overall) in the 2003 NAB AFL National Draft, has played 130 games since making his debut for Fremantle in 2005.
The loss of key defender Chris Tarrant, while a blow for the club, did give them some room to move in order to offer Mundy a contract that would keep him in the West.
Mundy had his best year for Fremantle in 2010, leading the way at the club in disposals (507) and handballs ((263), and across the league was ranked 19th for total possessions. His best game was 32 disposals - also a career-high - which he racked up against Geelong in the side's semi final loss.
He finished third in the 2005 NAB AFL Rising Star award along with winning the Beacon Award as Fremantle's best first-year player, and then played in the International Rules series in 2006.
