Irvine's future had been in doubt, even though he is enjoying his best season on the circuit, with four podium finishes that included a second place in the Argentinian Grand Prix.
Speculation came to a head last weekend when the 31-year-old's German Grand Prix finished on the opening lap at Hockenheim with the back of his car in flames following a collision with the Williams of Heinz-Harald Frentzen.
However, a brief statement from the Maranello-based constructors confirmed that Irvine - who has partnered Michael Schumacher since switching from Jordan - will retain his place in the team.
"Ferrari announce that they have exercised the existing option with Eddie Irvine in respect of the 1998 season," the statement said.
"It's the best situation for me to stay with Ferrari, as Michael and I have similar ways of driving and setting up the car," Irvine said. "I'm happy to stay with the team and maybe now we can forget about next season and concentrate on winning the world championship."
Irvine spent two seasons with Jordan before joining Ferrari and finished third in his first race for the team at Melbourne. But that proved to be Irvine's only podium finish of 1996 as Ferrari struggled with reliability problems, and doubts were raised over his future.
However, the decision to keep faith has been repaid this year, with Irvine lying sixth in the championship.