"The decision to retain Mark was very straightforward. He is an important member of our team and is currently in the best form of his career," team boss Christian Horner said in a statement.
The 33-year-old Australian's contract had been due to expire at the end of this season but he said it had been an easy decision to extend it.
Red Bull have started all seven races so far this year on pole position, winning three of them, and are challenging strongly for both titles.
"We began talking very early this year and were in a position to sign by the Barcelona [ Images ] Grand Prix," said Webber, who will be starting his fifth successive season with Red Bull after joining from Williams at the end of 2006.
"The decision to extend for a further year was a mutual one; it's widely known that I'm not interested in hanging around in Formula One just for the sake of it and at this stage of my career, I'm happy to take one year at a time."
The contract renewal ended speculation that Ferrari's [ Images ] 2007 world champion Kimi Raikkonen [ Images ], now driving a Red Bull-backed Citroen in the world rally championship, could return to Formula One with the team next year.
Webber has set the pace in the last three races, winning in Spain and Monaco, and leading in Turkey until a late collision with Vettel scuppered his hopes of a third win in a row and a Red Bull one-two.
Webber finished the race in third place while Vettel retired with a damaged car.
The two met last Thursday along with Horner, technical head Adrian Newey and Red Bull advisor Helmut Marko, at the team's Milton Keynes factory in Britain to clear the air ahead of this weekend's Canadian Grand Prix [ Images ].
"Seb and I will make sure it doesn't happen again and will continue to work openly together, no problem," Webber said afterwards.
"We have talked enough on it now, it's done, we're looking ahead and I'm focused on the race in Canada [ Images ]."
Webber, the first Australian to lead the championship since 1980 champion Alan Jones in 1981 and winner of four races with Red Bull, said his relationship with the Renault-powered team was as good as ever.
"I have a fantastic relationship with the whole team and the factory at Milton Keynes feels like home," he said.
"It's been incredible to be part of the team as it's moved forward from a mid-field competitor to one that is challenging for the Championship."