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Kovalainen, currently the No.3 driver at the team, has been promoted to replace reigning world champions and 2007 series leader Fernando Alonso, who will drive for McLaren next season.
The Finn, who has covered 28,000km in tests for the French team, was "now ready to take the next step and become one of the top two Formula One drivers for us", Renault said in a statement.
Renault meanwhile announced that team boss Flavio Briatore had extended his contract until 2008, and that Brazilians Ricardo Zonta and Nelson Piquet Jr would be its test drivers for 2007.