Stefan Bradl will stay with current squad LCR Honda and compete as a Honda factory-supported rider until the end of the 2014 MotoGP season.
The 22-year-old German stepped up to the premier class with LCR at the start of 2012 and was named Rookie of the Year. He finished eighth in the riders' standings and came close to a first podium at Mugello, where Andrea Dovizioso beat him to third by just 46 thousandths of a second.
His new deal effectively means he will ride factory-spec equipment for the next two seasons. Bradl previously beat Marc Marquez to the 2011 Moto2 title.
The German thanked Honda for helping him into grand prix racing's premier class, saying: "HRC's support was extremely important for me in my first season in the premier class and riding for the LCR Team has been a very positive experience for me. I am happy to continue with Lucio's [Cecchinello] team and HRC for the next two years."
HRC Vice President Shuhei Nakamoto said Bradl had surpassed expectations in his debut season.
"Stefan, in his first season in the premier class, has demonstrated high skills, motivation and professionalism exceeding our initial expectations," he said. "We are happy to have fixed this deal to work with LCR and Stefan through to 2014."
LCR team manager Cecchinello, meanwhile, believes securing Bradl on a two-year deal will benefit his team not just through the German's quality but also because of the extra stability it provides.
"Being a part of HRC's program and continuing our sport project with Stefan through to 2014 make us very happy and very proud," he said. "This deal gives us the chance to better plan our job aiming to close the championship in the top positions. Stefan has amazed everybody at his debut in 2012 and I am sure the best is yet to come."
LCR's last MotoGP podium came when Randy de Puniet finished third at Silverstone in 2009.