Team leader Froome, 30, won the Tour de France with Sky in 2013 having helped team mate Bradley Wiggins to victory the year before. He took the title again last year.
"Chris is not only one of the most talented and dedicated riders in the world, he is also a fantastic ambassador for the sport," Team Sky boss Dave Brailsford said of the Kenyan-born Briton who joined Sky in 2010.
"He is hungry for more success and we will help him achieve it," Brailsford added.
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.
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"Personally this is a great kickstart to 2016," Froome said. "I am more motivated than I've 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-Quick-Step for the coming season.
(Editing by Ed Osmond)
