Mills had a contract until 2008 on his £40k-a-week deal at Elland Road and Leeds will continue to pay the balance of £10k.
The move has amazed financial analysts. "At a time when most clubs appear to be regulating wage bills to offer a five-year contract is very generous," Vinay Bedi of Brewin Dolphin Securities told the Guardian. "We are seeing the majority of deals being done without transfer fees. There's a cash-flow benefit to clubs as they do not have to hand out large sums straight away.
"Yet the long-term implications connected to that wage, as Leeds discovered, are quite severe if you suddenly find yourself in financial difficulty.
"Five years is quite a long-term commitment and getting rid of players is a hell of a lot harder than bringing them in."
Meanwhile, Mills has said he will continue playing his usual style of play next season in the Premiership. "I will come here and play in my usual way," Mills told BBC GMR. "I will give it everything, even though I know I sometimes overstep the mark and get into a bit of trouble.
"That is me. I am not going to change and hopefully the fans will appreciate that."