The deal runs through the 2008 season. It was not due to expire until next year.
Labonte joined JGR in 1995. He has won 20 races and the 2000 NASCAR Winston Cup title during his tenure.
This season, Labonte has returned to championship-contender status, winning at Atlanta Motor Speedway and standing fourth in the series standings, 260 points behind Matt Kenseth.
"I feel great that I know where I am going to be driving for quite a few more years," Labonte said. "Joe, (Joe's wife) Pat, (sons) J.D. and Coy, have all been wonderful to work with and work for, and they have made me feel like a part of their family since day one. I am very blessed to have been able to drive for Joe and be a part of such a great organization."
In 283 career starts for Gibbs, Labonte has 101 top-five finishes and 163 top-10s.
Notable deaths of 2014 [PHOTOS]