Welsh driver Elfyn Evans, who won his home round of the championship last month, is also staying while Estonian Ott Tänak has left for Toyota.
News on a third car is expected soon.
“It’s great to finally announce our plans for 2018,” Ogier said in a team statement on Tuesday.
“What we have achieved together has been truly amazing, and we want to see that continue – to continue this fantastic journey and to defend all that we have achieved together,” added the 33-year-old Frenchman.
Ogier joined M-Sport a year ago after Volkswagen, with whom he won his first four titles, pulled out as part of a strategic shift to help the German carmaker overcome a costly emissions scandal.
At the end of this season, he had won 40 rallies.
“In Sébastien and Elfyn, we have a strong chance of defending our titles,” said M-Sport principal Malcolm Wilson.
“They’re both very intelligent drivers. There is no doubting their speed, but they also have a masterful approach to strategy that delivers results time after time.”