Renault have named Heikki Kovalainen as their replacement for world champion Fernando Alonso, who is leaving the team to race for McLaren in 2007.
Kovalainen has been promoted from Renault test driver
The Finn will partner Giancarlo Fisichella, who signed a one-year extension with the French team in June.
"I am thrilled to get the opportunity to show the team what I can do," Kovalainen, 24, said.
Team boss Flavio Briatore has also shelved his plans to quit Formula One and will stay on for two more years.
Renault appointed Kovalainen as their back-up driver for the 2006 season but he has been testing for the team since 2004 as part of their driver development programme.
The Finn, who was runner-up in the GP2 series last season, believes he is now ready to step up to the challenges of racing at the sharp end of F1.
"Next year is a new start for me," said Kovalainen. "There will be high expectations but I will not look at it as extra pressure.
We are not losing a driver who has won the world title - we are starting a new story with a future champion
Renault team boss
"I will be ticking off my goals one by one: to finish my first race, to do it in the points and to improve all year.
"I am sure I will have butterflies in my stomach in Melbourne but I'll be going back to what I have done all my life, which is racing."
Fisichella and Kovalainen will be supported by Brazilian test drivers Ricardo Zonta and Nelson Piquet Jr.
Zonta, 30, joins Renault after four seasons at Toyota while Piquet steps up from GP2, where he has impressed with his speed.
Briatore turned round Renault's fortunes after deciding to return to the sport in 2001, guiding them to the drivers' and constructors' double in 2005.
The 56-year-old brought Alonso into Renault as a test driver and helped him blossom into the sport's youngest world champion at 24.
Now, Briatore is looking forward to masterminding another new era witha new protege, alongside the continual technical guidance of engineering director Pat Symonds and technical director Bob Bell.
"It is important for the Renault team to begin a fresh cycle of development from 2007," said Briatore.
"We have taken the conscious decision to build for the future and we are very optimistic.
"We have a balanced driver line-up. Giancarlo is a real team player and brings us experience while Heikki is a bright talent.
"In our eyes, we are not losing a driver who has won the world title; rather, we are starting a new story with a future champion."