Both Froome and Team Principal Sir Dave Brailsford used the announcement to reiterate their stance on clean racing and their ambitions for the upcoming race season, which includes the Rio Olympics.
Team leader Froome joined Sky in 2010. He was instrumental in team-mate Bradley Wiggins victory at the Tour de France in 2012 before returning to win the title himself in 2013 and 2015. He was forced to abandon the three-week race in 2014 after crashing twice in the cobbled fifth stage.
"Chris is not only one of the most talented and dedicated riders in the world, he is also a fantastic ambassador for the sport," Brailsford said of the Kenyan-born Briton.
“Team Sky is proud to have him as our team leader. He is a winner and it is a great boost at the start of the new season that he has committed to stay with the team to the end of 2018.
"He is hungry for more success and we will help him achieve it."
"Team Sky have been fundamental to my success to date, so it was a very easy decision to commit to the Team until the end of 2018,” said Froome of his contract extension.
“Their values are my values and I am proud to ride for a team that has shown that you can win the biggest bike races in the world clean.”
Froome's focus this year will be on trying to retain the Tour de France crown and going for gold at the Rio Olympics where he is highly-fancied in the road race and time trial.
“2015 was a fantastic year for me both professional and personally and this is a great kick start to 2016,” said Froome. “I am more motivated than I have ever been and I have got big targets for this Olympic year. I can't wait to start racing."
Team Sky have also signed Spanish Grand Tour contender Mikel Landa from Astana and former road world champion Michal Kwiatkowski from Etixx-QuickStep for the coming season.
"By 2020, when we look back on the decade, we want Team Sky to be seen as the most consistent and successful Grand Tour team as well as one that is regularly winning Classics,” said Brailsford from the team training camp in Mallorca.
“2015 was a good year and I am proud of what we achieved together but our appetite for success has never been greater.
"Our focus is always on continuous improvement and what we can do better. We must challenge ourselves every day to push harder for more success in 2016 on and off the bike, and I believe that we have the team that can deliver that. It is a really strong group of riders with the best talent from Britain and abroad. Their different strengths give us real depth and more options.
"At the same time, Team Sky will continue to play a leadership role in moving the sport of cycling forward to a brighter future: innovating, riding clean and winning clean.
“We will work with the UCI and others and push for further reform to continue to rebuild trust in the sport.”