Merriman, who has skippered Wales at Under-21 level, made his Gloucester debut against London Irish in the Powergen Cup at the end of the 2003 campaign but then ruptured his ACL joint during pre-season training the following year.
It ruled him out of action for virtually the entire season but he has made one Guinness Premiership appearance this campaign as a blood replacement against Saracens.
He joined the club four years ago through the Academy set-up at Hartpury College and told www.gloucesterrugby.co.uk "At times it has been tough for me but I want to provide competition in the back row at Gloucester.
"Hopefully I can keep playing well in the A League games and I will then get an opportunity at first team level. There were opportunities for me back in Wales but I never wanted to leave Gloucester and I am determined to fight for a place.
"I want to be part of Gloucester's future and I am really confident I can be."
Merriman has been an integral part of Gloucester's A League side this season and has scored five tries - only one behind Jason Smithson of Newcastle who is the leading scorer.
Head coach Dean Ryan added: "James is a highly talented athlete and we want to see the best of him at Gloucester. We feel he has a bright future and along with a number of other young players, we want that to be at Gloucester.
"He has made a commitment for another year and that is very pleasing for everybody."