Villeneuve won the 1997 world title with Williams

The Canadian had a two-year contract with Sauber, but the team's new owners BMW were believed to be exploring ways of removing the 1997 title holder.

Team boss Mario Theissen said that the 34-year-old struggled in the first half of last season but then improved.

He added: "We are in no doubt that Jacques will make the BMW-Sauber team stronger in 2006."

Villeneuve has experience building up a new team from his time at BAR.

He is optimistic BMW's involvement with Sauber will help the team move forward in the years to come.

"Between 1999 and 2004 I experienced first-hand the difficulties and complexities involved in setting up a new team," he said.

"But I've never been afraid of a challenge.

"Sauber was already a good team and now we also have the resources of BMW behind us.

"I will do everything I can to contribute to the success of the BMW-Sauber team."