The BBC and Channel 4 had been locked in a bidding war over the star. Channel 4 had offered £18m and the BBC agreed to match it.
The three-year deal covers Ross's TV and radio work. His BBC contract had been due to expire next year.
The BBC confirmed Ross had signed a three-year deal that takes him to the end of 2010 but declined to comment on the figures involved.
BBC1 controller Peter Fincham said: "Jonathan is a uniquely talented broadcaster and is at the very top of his game.
"He's one of the defining faces of BBC1 and his Friday night chat show is the best in the business. We're all delighted he's staying."
Ross, 45, said: "I'm delighted to be staying with the BBC, if only because it is the only studio I can drive to without getting lost. It is the best channel in the country, and I'm proud they want me back."
The star hosts BBC1 chat show Friday Night With Jonathan Ross and movie review show Film 2006, plus a Saturday morning show on BBC Radio 2.
Leaked figures earlier this year revealed Ross was being paid £530,000.
The new deal puts Ross firmly at the top of the league of TV's best paid entertainers eclipsing the £2m a year that Channel 4 pay Paul O'Grady for presenting his chat show, and the £1.5m paid to Simon Cowell by ITV. Noel Edmonds is being paid £1.3m to host Channel 4's Deal or No Deal.
Earlier this month, Ross was named as the most powerful person in radio. He beat fellow BBC Radio 2 presenter Terry Wogan to the top of the list, which was drawn up by the Radio Times magazine.
Ross began his media career as a researcher on the Channel 4 chat show Loose Talk. He made his TV debut in 1987 on The Last Resort - a show he had devised with his friend Alan Marke.