The iconic O2 Arena on the banks of the River Thames has staged the season-ending showpiece since 2009 and the original five-year deal was due to run out in 2013.
However, the commercial success of the tournament and the fact that many of the world's top players are in Paris the week before made London a clear favourite to continue as host.
"We are very happy to announce the extension of our original commitment in London for a further two years, meaning the Barclays ATP World Tour Finals will be played in London for at least the next three years through 2015," ATP executive chairman Brad Drewett said in a statement.
"We are very proud of our marquee event, the ultimate showcase of men's tennis."
It proved a popular decision too for US.Open champion Andy Murray, Britain's first male grand slam champion for 76 years.
"As far as the players' schedule, it's incredibly convenient and it's worked very well I think the last few years. They get very good crowds. It's a fun arena to play in," Murray told reporters after losing to Novak Djokovic in front of another full house on Wednesday.
"Because of the way the schedule is, you can't really have it anywhere else. I think it works well just now."
Since taking over from Shanghai as the 14th host city of the tournament that was first staged in Tokyo in 1970, London has enjoyed huge popularity with the players, the majority of whom are based in Europe, and fans.
Both day and evening sessions at the 17,000-seater venue have been near sell-outs again this year.
More than 750,000 fans attended the tournament in the first three years.
"This week we look forward to welcoming our one millionth fan through the gates at the 02 since 2009," Drewett said.
The eight-day tournament, featuring the top eight singles and doubles pairs this year, has total prize money of $5.5 million. This year's event was brought forward two weeks in a bid to shorten the season.
The final is next Monday.