Financial terms were not disclosed for the 31-year-old Spanish driver, who declared he was "thrilled" to continue his journey with the team he joined last year following his departure from Ferrari.
"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," said Sainz.
He has followed up a ninth-place finish in 2025 by sitting in 15th place after 11 races in 2026.
The season is set to resume this weekend at the Dutch Grand Prix in Zandvoort, Netherlands.
"We have what it takes to turn this around together," Sainz said. "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."
Team principal James Vowles was pleased to keep Sainz in the fold.
"From the moment he joined, Carlos' talent behind the steering wheel and dedication back at the factory have been extremely valuable for this project -- working day in, day out with his engineers to find every millisecond," Vowles said.
"He is a leader of this team, and I'm thrilled that he can see what's possible as we continue to rebuild it. It's not just his racecraft and speed that stand out, but the work he does behind the scenes in the pursuit of high performance.
"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."
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