Sauber will switch to Honda engines in 2018, ending an eight-year relationship with Ferrari.
The struggling Swiss team will be the second outfit using Honda power units next season, joining the Japanese company's works partner McLaren.
McLaren welcomed the deal, saying it was "a chance to double the opportunity for research and development in 2018".
Sauber are the slowest of the 10 teams in F1 this year and Honda have the least powerful engine.
The Japanese company admits it has failed to make the progress it expected with a new engine design this year but is hopeful it can improve as this season develops.
Sauber team principal Monisha Kaltenborn described the new engine deal as a "strategic and technical realignment".
Katsuhide Moriyama, Honda's chief officer for brand and communication operations, said it was "a new challenge in Honda's F1 activities" and the company would "strengthen the systems and capabilities" of its research and development base in Sakura, Japan, and its F1 satellite base in Milton Keynes.