Britain had planned to retire sentinel in 2015.
The U.K. Ministry of Defence said its sentinel programme recently deployed in Nigeria to help look for 200 missing schoolgirls, would remain in service until 2018.
Raytheon Co, U.S. maker of radar, missiles, and other defence electronics, said it would improve software on the sentinel to make it better equipped for maritime surveillance.
Britain had planned to retire sentinel in 2015 but it did not put a figure on how much it was paying to fund the extension.
Britain has cut defence spending by around eight per cent over the last four years as part of a government plan to reduce a record budget deficit.
It proposed retiring sentinel operated by the Royal Air Force as a cost-saving measure in its 2010 defence review.
Sentinel has been deployed by Britain in Afghanistan, Libya, Mali and more recently, Nigeria.
Raytheon CEO, Tom Kennedy, welcomed Britain’s decision and said it reflected the aeroplane’s performance, reliability and proven intelligence-gathering and communications capabilities during military engagements.
“The sentinel has been a tremendous asset to the U.K.,” he said.