The 22-year-old Hummels, who joined Dortmund from defending champions Bayern Munich, won the last of his three caps in last month's 1-1 draw with Italy and is tipped as a future star of the national side.
"We have, in Mats, a very successful footballer who plays a significant role in our long-term planning and we have taken into account his sporting development," said Borussia director of sport Michael Zorc.
Hummels' signature means Dortmund will keep the core of their team which currently enjoys a nine-point lead at the top of the Bundesliga table.
Hummels joins fellow Germany team-mates Marcel Schmelzer, Mario Goetze and Kevin Grosskreutz on contracts until 2014, while Turkey midfielder Nuri Sahin is signed up until June 2013.
Coach Jurgen Klopp has also been signed up until 2014.
Borussia host fifth-placed Mainz 05 in the Bundesliga on Saturday night.