Rosberg has established himself as an integral member of the team since arriving from Williams at the beginning of 2010, becoming the first German driver to win behind the wheel of a German car in the 2012 Chinese Grand Prix before helping Mercedes win two consecutive world championships in 2014 and '15.
The 31-year-old's place at the Silver Arrows had come under much scrutiny due to his troubled relationship with team-mate Lewis Hamilton, with the pair coming to blows on track on numerous occasions since Mercedes emerged as F1's dominant force.
But with the help of former McLaren and Ferrari driver Gerhard Berger, who oversaw negotiations on his behalf, Rosberg—a Mercedes man to the core—will represent the manufacturer for at least two more years.
As one of the more predictable events of silly season, particularly after Ferrari decided to keep Kimi Raikkonen for 2017, Rosberg's retention is unlikely to have a major impact on this year's driver market, yet the repercussions of the deal could be felt for years to come.
Here, we examine how Rosberg's contract extension may affect the team themselves, as well as Mercedes' answer to Max Verstappen and a driver who would have fancied his chances of partnering Hamilton in 2017.
Mercedes have stability for 2017 ahead of potential 2018 showdown
Throughout their time as Mercedes team-mates, the contracts held by Rosberg and Hamilton have always run to different expiry dates.
When Hamilton penned a contract extension of his own ahead of last season's Monaco GP, taking him until the end of 2018, the attention again turned to the man on the other side of the garage.
The toing and froing between Hamilton and Rosberg in contractual terms has been almost as hectic as their on-track battles over the last three seasons, with Mercedes forced to negotiate a fresh deal every year and the drivers facing regular questions over their respective futures.
Rosberg's commitment until the end of 2018, then, will give the team valuable stability ahead of the major regulation changes in 2017—when their dominance is likely to come under threat—as well as allowing the drivers to focus solely on racking up further grand prix wins and championships.
But it could also signal the beginning of the end of the Hamilton-Rosberg partnership.
Although Mercedes have one of the finest driver pairings on the current grid, their lineup will begin to look tired come the beginning of 2019, when both men—having spent six seasons together—will be fast approaching their 34th birthdays.
With that in mind, the 2018 season may see Hamilton and Rosberg competing not only for a potential world title, but for the opportunity to be retained alongside an emerging talent.
As Toto Wolff explained, per F1 journalist Tobi Gruner, signing both drivers until the end of 2018 has given Mercedes several "opportunities to play with."
Pascal Wehrlein facing a long road toward a Mercedes seat
Pascal Wehrlein may only be halfway through his debut season in F1, but the "little prince" of Mercedes has made no secret of his desire to be fast-tracked to a championship-winning car in the style of Verstappen.
"I am ready, for sure," the 21-year-old told the official F1 website in May when asked if he would be a suitable replacement for Rosberg in 2017, insisting he wants to "sit in a Mercedes cockpit as fast as possible."
Wehrlein's points finish for the lowly Manor team in June's Austrian GP, on an afternoon Rosberg was penalised for shoving Hamilton off track on the final lap, had the potential for the youngster to emerge as a credible alternative for next season.
But in agreeing a two-year contract extension with Rosberg, Mercedes—as cautious, careful and meticulous as ever—have condemned their protege to an apprenticeship of at least three seasons.
Ahead of the Hungarian GP weekend, Wehrlein—perhaps aware that confirmation of Rosberg's new deal was imminent—admitted he would be "happy" to stay with Manor for a second season in 2017, suggesting the team can make major progress under the new regulations, per Crash.net.
The benefits of remaining in a stable, low-pressure environment are obvious for a young driver, but how will Mercedes manage Wehrlein's progression in 2018?
Will they ensure he graduates to the midfield with one of their more established customer teams—Williams or Force India, with whom he tested in 2015—for his third season in F1?
Or will they be comfortable moving Wehrlein from one end of the grid to the other in a single step, selecting him as a successor to Hamilton and Rosberg after three years in modest Manor machinery?
Either way, the little prince will be forced to wait some time yet before becoming king.
Fernando Alonso must make McLaren-Honda work or return to Renault
As Rosberg's negotiations dragged on, it was safe to assume Fernando Alonso was lurking in the background, waiting for an opportunity to pounce.
This, after all, is the man who openly admitted trying to engineer a seat swap with Hamilton in late 2014 when the British driver was discussing a contract extension with Mercedes, per Spanish radio station Cadena Ser (h/t Motorsport.com's Jonathan Noble).
Alonso famously failed to pull off that masterstroke, and when Sebastian Vettel stole his seat at Ferrari—and Red Bull immediately blocked one of the Spaniard's potential destinations by promoting Daniil Kvyat—the two-time world champion was sentenced to a return to the McLaren-Honda team.
A McLaren-Honda team who have scored points in just 10 of the 29 races since the beginning of 2015.
In May, Wolff told Spanish publication El Mundo (h/t F1i.com's Phillip van Osten) Alonso would be among the "other options" considered by Mercedes if Rosberg was unable to agree a new deal, referring to him as "one of the best drivers in history" and praising his immense speed and motivation.
It was almost as though Wolff, through sheer sympathy for Alonso, felt a moral obligation to present him with a car capable of winning that elusive third title.
Yet the most complete driver of his generation has once again been overlooked and, with seats at Ferrari and Red Bull off limits, Alonso has no choice but to persevere with McLaren, whom he says are best placed to end Mercedes' dominance of F1 despite their current struggles, per Autosport (h/t Eurosport).
Whether he truly believes that is another matter entirely, however, and it is still plausible that he could fall back onto the safety net we know as Renault, where he tends to flee whenever things don't quite go to plan at other teams.
Upon the manufacturer's return to F1 at the beginning of 2016, Renault CEO Carlos Ghosn admitted he would be interested in signing Alonso for a third time when his McLaren contract expires at the end of next season, per Spanish newspaper AS (h/t Sky Sports' James Galloway).
It is unclear whether Alonso will finish his career with McLaren or make yet another return to Renault, but it is almost certain that if he is to end his wait for a third championship, he will have to beat, not join, Mercedes.