Jenson Button will be replaced by Stoffel Vandoorne at McLaren next year and take on a stand-by role that effectively marks his retirement from Formula One.
The new deal leaves the door open for a return in 2018 should Fernando Alonso decide to retire at the end of his contract in 2017, but in reality is likely to mark the end of Button's 17-year Formula One career. Vandoorne has been a part of McLaren's young driver programme since 2013 and made his debut at this year's Bahrain Grand Prix to substitute the injured Alonso for a single race.
McLaren confirmed the news after qualifying at the Italian Grand Prix, putting an end to a year of speculation about Button's future. Although it has been clear for some time that Vandoorne would replace Button at McLaren, Williams showed interest in the 2009 champion if a deal could be found at the right price. However, Button said he made his mind up over the summer break to take the McLaren offer, which will now see him focus on team and car development at the Woking-based team.
"I'm delighted that I'll be staying on as a key member of the McLaren-Honda team," Button said. "In fact I'm massively excited about my new role, which has come about as a result of a number of in-depth chats with Ron. Specifically, I'm looking forward to becoming even more deeply involved in the team's efforts to bring about the success we've all been striving to deliver.
"I love McLaren-Honda -- I firmly believe it's made up of the best bunch of people I've ever worked with -- and I have no intention of ever driving for another Formula 1 team.
"To be clear, I'm very definitely not retiring. I'm contracted for both 2017 and 2018, I intend to work hard on car-development, and I'm sure I'll get behind the wheel of the new car at some point."
McLaren boss Ron Dennis added: "McLaren-Honda's race driver line-up next season will be Fernando and Stoffel -- a perfectly balanced mix of proven brilliance and immense potential.
"But, before I speak on the subject of either of them, I want to talk about Jenson. As a race driver for our team these past seven seasons, he's been superb, both on and off the track. And, as we're seeing this season, he remains superb - not only fast and fit but also experienced and expert. He'll start his 298th Grand Prix tomorrow; as such, he's the most experienced driver on the grid.
"Having extended his contract to include 2017 and 2018, he'll continue to be a senior, influential and committed member of the team, and will remain centrally involved in the development of our cars. He'll also be available to race for us if circumstances require it.
"On behalf of all at McLaren-Honda, I want to say how thrilled we are that Jenson has extended his contractual relationship with us. Moreover, I'm absolutely certain that the depth of his experience and the currency of his expertise will give us an advantage over our opposition next season."
Button came close to leaving McLaren at the end of 2014 when team boss Ron Dennis wanted to keep his teammate Kevin Magnussen on board, but Dennis was outvoted at board level by fellow shareholder Mansour Ojjeh and the Bahraini government's Mumtalakat investment fund. Rumours Button would be replaced by Vandoorne also followed him into the final rounds of the 2015 season, but again the British driver held on for another season to drive alongside Alonso this year.
Assuming Button does not return to the grid in 2018, this year's Abu Dhabi Grand Prix will mark Button's 308th and last Formula One race. Since joining Williams at the age of 20, Button has driven for Benetton, Renault, BAR, Honda, Brawn and McLaren, scoring 15 race wins and 50 podiums to date. His championship victory in 2009 remains one of the sport's fairytale stories after team boss Ross Brawn made an 11th hour deal with Honda to buy its team before going on to win both drivers' and constructors' titles.