The two-time world champion was snared by Yamaha for the 2008 season after winning back-to-back titles in the 250cc class.
Since then, the Spaniard has enjoyed a superb time with the team, winning 31 grands prix and securing championship crowns in 2010 and 2012.
"I am very happy to finally be able to make this announcement," Lorenzo is quoted as saying by MotoGP's official website.
"It is a relief to be able to now completely focus on the remainder of the 2014 season in the knowledge that our relationship will continue for the next two seasons.
"It has always been my wish to continue my career with Yamaha; I strongly believe we can fight for a third title together."
Lorenzo sits fifth in the 2014 standings and has had to sit by and watch compatriot Marc Marquez win all nine races thus far.
However, the 27-year-old has vowed to continue giving his all until the end of the season.
"This season has been very challenging after a difficult start, however we will continue to take it race by race, giving 100 per cent until [the final race in] Valencia," he added.
"I want to thank Yamaha for their continued belief in me and all the Yamaha fans around the world who continue to support me."