Lance is the estranged mother of Laurel (Katie Cassidy) and ex-wife of Quentin (Paul Blackthorne).
Doctor Who actress Kingston will debut in the recurring role later this year, Entertainment Weekly reports.
Dinah will return to Starling City to make amends with the family that she abandoned following the death of her daughter Sarah (Jacqueline MacInnes Wood).
The 49-year-old actress is best known for playing River Song on Doctor Who and for starring on ER between 1997 and 2009. Her recent credits include guest roles on Private Practice, NCIS and Law & Order: SVU.
Forthcoming guest stars on Arrow include Fringe actor Seth Gabel, Spartacus star Manu Bennett and Farscape's Ben Browder.
The CW drama's co-creator Andrew Kreisberg recently admitted that his own "fandom" has led to him casting cult favourites such as Kingston and Torchwood's John Barrowman on the show.
Arrow airs on Wednesdays in the US and on Mondays on Sky1 in the UK.
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Watch a clip of Alex Kingston on Doctor Who below: