The Swede, who joined the team after a rookie 2014 season with Caterham, was praised by Sauber boss Monisha Kaltenborn for "going that extra mile" in what has been a tough 2016 season for the Swiss-based outfit.
She said: "He went through very difficult times with us, but managed those very well.
"In the last two years, he has made significant steps in regards to his personal development, proving his skills on as well as off track, especially when circumstances are not easy.
"He is not only a good driver, but also an important team player who understands how to work with the team and how to motivate everyone with his positive attitude."
Ericsson will have to wait to find out the identity of his teammate for next year with talks over 2017 ongoing with current Sauber driver Felipe Nasr.
"That will be announced in due course," they said.
Ericsson described his new deal as "great news", saying "I really feel at home" with the team.
"We have had ups and downs, but we always stick together and work as hard as we can," said the driver who is pointless going into the season-finale in Abu Dhabi on Sunday.
Only two other F1 seats - both at Manor - remain open for 2017.
