Marco Simoncelli will retain both his Gresini Racing seat and a factory-specification Honda for the 2012 MotoGP season.
The Italian has been with Fausto Gresini's squad since stepping up to MotoGP from the 250cc series in 2010, and was given equal machinery to the three works Honda riders this year.
"To be wearing the colors of Team San Carlo Honda Gresini for another year and riding a Honda RC213V gives me a lot of satisfaction," said Simoncelli. "To be kept on as part of project that Honda HRC are so supportive of in collaboration with Team San Carlo Honda Gresini gives me a lot of confidence and all the motivation I need to show that I can be among the best in MotoGP again. 2012 will be an important season for me and I want to give all those people who have believed in this project plenty to get excited about."
Simoncelli has become a MotoGP front runner this year, taking pole at Catalunya and Assen during a run of form that saw him qualify on the front row for six straight races. But he had difficulty converting that speed into race results, amid a string of crashes and incidents that saw him heavily censured by rivals. The 24-year-old ultimately steadied himself and finally took his maiden podium finish at Brno.
Gresini said he was delighted that a new deal had been reached with Simoncelli and Honda.
"Marco's qualities as a rider, as a man and as an extroverted communicator, which made us keen to continue our collaboration," said the team boss.
Simoncelli is currently eighth in the MotoGP standings with four rounds to go.