The 28-year-old has spent all of his professional career with the White Rose, winning two County Championships in the process.
Rashid’s form for Yorkshire with both bat and ball - he averages 35 as a first-class batsman - has seen him earn 46 England caps across all forms of the game.
He also finished as one of the top wicket-takers at the Big Bash over the winter, starring for the Adelaide Strikers, and said: “I’m delighted to sign a contract extension with Yorkshire.
“The last year has been great for me after winning the Championship, playing across all three formats for England and experiencing the Big Bash at Adelaide Strikers.
“I love representing my home county and I hope to win more silverware with Yorkshire in the years to come.”
Yorkshire’s director of cricket, Martyn Moxon, added: “I’m thrilled. Adil is a special player across all three forms of the game and had a memorable year in 2015, both in England and overseas.
“He has been a very important player for Yorkshire and has played a crucial part in our recent success.”
Rashid has taken 436 wickets in his first-class career at an average of 34.75.