Red Bull announced on Thursday the 21-year-old German will replace David Coulthard when the Scot retires at the end of this season.
Vettel, who currently drives for Red Bull's sister team Toro Rosso, admitted he was very happy to stay at the Red Bull family.
"You can imagine I'm very pleased and I'm very looking forward to next year," Vettel told a news conference. "It's a step up - it has always been my target and obviously it's a pleasure.
"I've been working with Red Bull for a very long time - since 2000 when I was go-karting - I could never imagine to race in F1.
"At that time they didn't have an F1 team. At some point they had two and it was a dream to race for them. And obviously to drive for Red Bull Racing next year is another dream come true."
He added: "Obviously, as I said for a very long time I've been part of the Red Bull family. I think that I've shown potential if you look at the development of the results in the last couple of years.
"My target is clear, I want to progress, to move forward, and I think I have the opportunity here so there was no doubt."
Despite the new deal, Vettel said he will remain completely focused on the remaining part of the season with Toro Rosso.
"The target is clear. You can see I'm still a Toro Rosso driver and we have nine races left - it's just half time," he said.
"We got our new car just a couple of races ago and I think you could see that it's going in the right direction. We seem to get stronger and stronger so my main focus is on the remainder of this season.
"I've always done things step by step and I'm not going to change it in the future. My main focus is now on the 2008 season. Then comes Winter and we will start to prepare for the new season."
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