Already under contract until the end of the 2017 campaign, Timani's new deal with the Australian Rugby Union (ARU) and the Rebels will see the 26-year-old through to the 2019 Rugby World Cup in Japan.
Timani, who rejected overseas interest, made six Test appearances for the Wallabies last year after debuting against Argentina in Perth.
"I'm thankful for the opportunities in the last 12 months, it was a goal to play for the Wallabies and the result of lots of hard work, but I feel like there are lots of improvements that I can still make in my game," Timani said.
"I've enjoyed my time in Melbourne over the last couple of years so I'm looking forward to working with Rebels head coach Tony McGahan and forwards coach Zane Hilton to give myself the best chance at fulfilling my dream of playing at the Rugby World Cup."
Wallabies head coach Michael Cheika added: "Lopeti made a great entry into the international arena with the Wallabies last year and he certainly did not look out of place in a Test jersey.
"The challenge is just starting for him now and you can see he wants it after knocking back some lucrative European offers to stay and play in Melbourne and putting his hand up to represent the Wallabies again in 2017."