The confirmation of Perez means Force India will field an unchanged driver line-up in 2018, with Esteban Ocon already confirmed on a multi-year contract.
Sergio Perez has signed a contract extension to remain with Force India for the 2018 Formula One season.
"Staying with Sahara Force India was always my priority". The Mexican driver has clinched four podiums since joining Force India and narrowly missed out on the rostrum at the Spanish Grand Prix this year with his fourth place finish.
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Perez, who is set for a fifth season with the Silverstone squad, had said earlier in the week that he had two options for next year. "The team have allowed me to show my talents as a driver and I feel very happy here".
The friction began at the Canadian GP, prior to Baku, when Ocon was exasperated at his team's decision not to let him overtake Perez.
It remains to be seen whether Perez will remain with Force India beyond 2018, as it is likely positions at Ferrari, Mercedes and Red Bull will open up at that time. I'm proud of everything we have already achieved together and I think there is more to come.
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"The team has done an awesome job this year to develop the vehicle and establish our position as the fourth-best team in Formula 1".
Co-owner and team principal Vijay Mallya said: "Sergio has played an important role in our success story over the last few years".
"Alongside Esteban, retaining Sergio gives us stability going into next season and one of the most exciting driver pairings in Formula One", Mallya said.
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Perez has seven F1 podiums in his career, four with Force India and the other three all during a breakthrough season with Sauber in 2012 that earned him a move to McLaren in 2013. "In the end it was an easy decision to continue our journey together", he added.