Sheridan had been the subject of intense speculation, linking him with a move out of the Aviva Premiership. But the news will be a major boost to the Sale management after Charlie Hodgson, another Lion, signed for Saracens.
"I know he has turned down some big offers from other clubs," said Sale chief executive Mick Hogan.
"He is one of the best prop forwards in the world and we are thrilled he has made this commitment to stay with us.
"This is a massive statement of intent by the club and Andrew. Steve Diamond signed him back in 2003 and once Andrew knew about Steve's return, he was delighted to put pen to paper."
Newly-appointed executive director of sport, Diamond, was equally delighted to secure the services of Sheridan, who has made 100 games for the club.
"I am very pleased Andrew has re-signed for the club," added Diamond
"I remember watching him develop as a player and knew he was going to be one of the best as his career progressed. I have followed his progress with interest and am looking to build a team around Sherri and Mark Cueto who has also been a loyal servant to the club down the years."