The German joined Mercedes upon the manufacturers' return to the sport in 2010 and is now in his fifth season with the team.
And it has so far proven to be an extremely successful campaign for the 29-year-old, who heads the drivers' championship by four points from team-mate Lewis Hamilton in a season dominated by Mercedes, who have won all but one of the first nine races.
Rosberg's season has been somewhat marred by controversy, due to an occasionally fractious relationship with Hamilton.
However, that has not affected Mercedes' desire to tie Rosberg - who has three race wins in 2014 - down to a new long-term deal.
"I am very proud to drive the Formula 1 Silver Arrow of the modern era," Rosberg told Mercedes' official website.
"As a German, the heritage of Mercedes-Benz is very special for me, and I am proud to be able to represent the best car brand around the world.
"It has been a difficult road to get to where we are now - but everybody kept believing and, thanks to the fantastic support from Mercedes-Benz, we are now leading the way in F1.
"I'm looking forward to the next years together, when we will keep pushing to win even more races - and, hopefully, championships."
Rosberg will look to extend his lead over Hamilton in front of his home fans at the German Grand Prix this weekend.