In a huge boost to both the Reds and Wallabies, Horwill has agreed on a new two-year contract.
Horwill, who has played 35 Tests for Australia, is coming off an injury-plagued 2012 season, which was hampered by hamstring and knee problems.
But he has been back to his best for the Reds over the last month since making his long-awaited return six weeks ago.
"I've made no secrets about what playing for the Reds and Wallabies means to me, so I couldn't be happier to have the contract finalised and my future settled," Horwill said.
"We've created a pretty special environment here at the Reds over the past few years but we still feel there is plenty we can achieve as a group, beginning with winning another Super Rugby title this year.
"On a personal level, to play 100 games for Queensland would be a massive honour, so to now have an opportunity to be within reach of that mark is something that will be exciting as the time gets closer."
The 28-year-old is expected to lead the Wallabies in their three-Test series with the British and Irish Lions next month.
Australia coach Robbie Deans said he was delighted Horwill has decided to re-commit to Australia rugby.
"Players have choices and a lot of factors come into it," Deans said.
"But a playing career is a finite thing so commitments aren't made lightly.
"The key is that these guys see the opportunity ahead, see the progress that is being made in the game in Australia, and want to play their part in continuing to bring it forward."
His re-signing for the Reds comes just a week after winger Digby Ioane revealed he would be leaving the Super Rugby club and the national team for a lucrative stint with French club Stade Francais.
Horwill, who suffered a knock to the head in the Reds' draw with the Western Force over the weekend, is expected to be right to face the Sharks at Suncorp Stadium on Friday night.