The Barbados-born 21-year-old made his first-team debut in 2016, taking 28 wickets in seven first-class games.
He signed a first professional contract in August, but the club have now tied him to a longer deal.
"I'm happy to extend my contract. I can develop without any pressure and the aim is to continue to build on what I did last season," said Archer.
"My aim for next season is to take 70 wickets across all three formats, and if I can cement my place in the team then I think that can be a reality."
He also showed batting potential by making a career-best 73 against Essex and coach Mark Davis believes he is an "immense talent".
Davis added: "He is still a young man learning his trade but the signs are clearly there that he will be an integral part of our future success."
Sussex pace bowler Jofra Archer has agreed a two-year contract extension to run until the end of the 2019 season.