The 14-times Olympic gold medal winner has been with Speedo since 2001 and the new four-year deal will extend the sponsorship through to 2013.
As part of the arrangement, Speedo says it will donate $10,000 to Phelps’ foundation, which is dedicated to growing the sport of swimming, for every world record he sets.
Speedo’s products came under scrutiny earlier this year when the sport’s governing body, FINA banned non-textile suits from next year. Among the suits outlawed will be Speedo’s LZR Racer, which Phelps wears.
Phelps was embroiled in controversy in February when he was photographed appearing to inhale from the pipe.
Most of Phelps’ sponsors, including Subway, stood by him but Kellogg announced it was not going to renew its contract.
Speedo also has British Olympic gold medal winner Rebecca Adlington on its roster of brand ambassadors.