The former 125cc and 250cc champion is second in this year's MotoGP standings and goes into Sunday's Aragon Grand Prix seeking a third consecutive win.
"This has been the team of my dreams since I was a kid and that's still the same feeling I have now," he said.
"We've had a long and successful relationship already and believe we can have even more success in the future."
Pedrosa, 24, has been with Repsol Honda for his entire senior career, winning 35 races in all classes and 12 MotoGP, including the last two races at Indianapolis and San Marino.
This season he has finished in the top two in eight out of 12 races, and he is the only serious rival to fellow Spaniard Jorge Lorenzo for the riders' championship.
"Dani is clearly at the peak of his powers," said Honda Racing president Tetsuo Suzuki.
"We believe his relationship with the machine and the team will continue to grow and that he will mount an extremely strong challenge for the MotoGP world title over the next two seasons."
Next season Pedrosa will be joined at Repsol Honda by former world champion Casey Stoner, who is moving from Ducati.
The future of Pedrosa's current team-mate Andrea Doviozioso, who is third in the championship standings, is unclear.
source: http://news.bbc.co.uk
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