Leclerc earned his new contract with a spectacular debut season in Scuderia scarlet.
The Monegasque took seven pole positions across the campaign, more than any other driver and added two race wins in Belgium and Italy, breaking Ferrari's nine-year drought at Monza in the process.
Leclerc finished ahead of Vettel in the drivers' championship, having wiped out the pre-season "priority" bestowed upon the German by team principal Mattia Binotto, becoming just the second team-mate to defeat Vettel across a full season.
The 22-year-old's extension also arrives amid suggestions that Lewis Hamilton could be his team-mate in 2021, with Mercedes' six-time world champion having met Ferrari president John Elkann in 2019.
Binotto has said that Ferrari want an "experienced" driver alongside Leclerc when F1 falls under new regulations in 2021. Both Vettel and Hamilton fit the bill, but it remains to be seen if the German can convince Ferrari that he remains at the peak of his powers.
Vettel may not have long to prove his worth, with Binotto saying that a decision will start to be made around next year's Spanish GP.
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