The Dutchman was under contract until 2019 but after his sensational Giro win last month, he and his team have negotiated a new contract which takes him through until the 2022 season.
Both parties have been in discussions about a contract for several months and an agreement has been reached.
Dumoulin, 26, is currently in his sixth year at the team, having joined in 2011 when they were a Pro-Continental team under the guise of Argos-Shimano.
"I am really happy in the team so renewing my contract comes as a natural decision to me," Dumoulin commented.
"The philosophy of the team suits me really well, although demanding I know it continues to develop me as a rider and together we make each other stronger."
It is likely that Sunweb have provided assurances to Dumoulin that they will strengthen their squad to give him with greater support in the mountains and in Grand Tours where he is now expected to be a leading contender for many years.
He added: "Every year we've made huge progression and continue to make steps to find ways to improve as a result of the teams expertise.
"I have grown alongside the team for the past six years and I am confident that we will continue this upwards process for the coming years."
An outstanding time triallist - his win in the Giro was owed to his testing prowess on the final day when he overturned Nairo Quintana's lead - Dumoulin shot to prominence at the 2015 Vuelta a España when he, unexpectedly, held the leader's jersey until the end of stage 19.
Iwan Spekenbrink, Sunweb's CEO, said: "Together we have already had many successes and we are extremely pleased to extend his contract so that we may continue to have many more together."
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