The 28-year-old replaced the retired Nico Rosberg at Mercedes, signing a one-year deal, and currently sits third in the driver standings with two wins from 13 races, with teammate Lewis Hamilton leading the way.
Mercedes executive director Toto Wolff said: "We gave Valtteri a big challenge this year - joining the team at the 11th hour, stepping up to the forefront of F1 and pairing with the sport's best driver as his teammate. With that in mind, his results have been probably even more impressive.
"There have been ups and downs – more ups, fewer downs – and some great highlights like his two race wins in Russia and Austria. Overall, the balance of his performances and his upward trajectory made it a no-brainer for us to continue with him into 2018.
"For our team, the bonus factors are the respect and sportsmanship that have grown between our two drivers. The chemistry and dynamic between Valtteri and Lewis work and are what we need to take the fight to our competitors."
Bottas added: "As a driver, I've been able to learn and grow massively, and we have already enjoyed some really good moments this season that I will never forget. I've been very impressed by the mentality, commitment and the team spirit this team holds. Partnering Lewis has also been really good, and I'm enjoying the respect we have and the will to push this team forward together.
"I'm happy to have celebrated my first race wins in a Silver Arrow. However, there's always room for improvement and I still have not shown my full potential. I will continue to work hard on and off the track, to further improve my driving, get even better results and show that putting their trust in me was the right decision."
Formerly of Williams, Bottas is on course for his best ever finish in F1, having previously finished a career-best fourth in the 2014 season.