Rossi was testing in Sepang, Malaysia, during January

The Italian has won 25 GPs and two world titles since joining Yamaha two years ago but lost his title to Repsol Honda's Nicky Hayden last season.

Hayden ended Rossi's five-year reign as world champion.

"I'm very happy I renewed the contract with Yamaha until the end of 2008, so now I can just concentrate on racing this season," said the 27-year-old.

"I think that last year, when we fought back from what seemed an impossible situation to come so close to taking the title, showed what a fantastic team we are - and this is why I want to stay with Yamaha.

"The past three years with Yamaha have been very positive, and this is why I am pleased to stay.

"The atmosphere in our garage is always relaxed and happy, and I think this is something very special and difficult to find.

"I have great faith in Yamaha and I am very excited about my future and the future of the 800cc bike with them."