The 29-year-old is in title competition with his teammate Lewis Hamilton, but the German currently leads the way at the top of the drivers' championship standings.
Ahead of this weekend's German Grand Prix, Rosberg has expressed his pride at extending his association with the team.
"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 in the world," said Rosberg.
"We have an awesome team and I am confident that we have the right people in place at every level. I'm looking forward to the next years together, when we will keep pushing to win even more races and hopefully championships."
Head of Mercedes Toto Wolff added: "His speed, commitment and focus have all helped to give clear direction and to drive the team forward. With his performances in 2014, Nico has demonstrated to the outside world what we already knew in the team - that he is one of the very top drivers in Formula 1."
Rosberg has earned six victories, 17 podium finishes and eight pole positions since joining the team in 2010.