Sainz agreed to stay at Williams just 24 hours after the British team confirmed his team-mate Alex Albon will be retained for the 2027 campaign.
The former Ferrari and McLaren driver has endured a disappointing season so far.
But the four-time Grand Prix winner, who has failed to score a point at the last six rounds, has elected to remain with Williams for the foreseeable future.
"I'm thrilled to announce my continued journey with the Williams family," the 31-year-old said.
"I truly believe in the people that form this team, both at the factory and at the racetracks, and the investments and hard work that are happening in the background.
"We have what it takes to turn this around together. I'm as committed as I was on day one to helping get Williams back to where it belongs, and I look forward to creating more memories with the team."
Sainz's decision comes ahead of this weekend's Dutch Grand Prix and was a relief to Williams team principal James Vowles.
Williams failed to make the first pre-season test, and their car has been uncompetitive throughout the opening half of the campaign.
"Carlos is a leader of this team, and I'm thrilled that he can see what's possible as we continue to rebuild it," Vowles said.
"Carlos shares the belief and ambition we have at Williams and is pushing every day to deliver it.
"Along with Alex, I truly believe we have one of the strongest line-ups on the grid, and a team capable of fighting for every ounce of performance together."