As part of the deal, Lotus will also use lubricant designed by Mercedes partner Petronas.
However Lotus will continue to manufacturers its own transmission systems.
Mercedes motorsport director Toto Wolff said it was “strategically important” for Mercedes to find a replacement customer team to take over from McLaren, who will no longer use its engines next year having signed a deal with Honda.
“Lotus F1 Team is an impressive organisation that has delivered competitive on-track performances in recent seasons,” said Wolff. “We are pleased to welcome them to the Mercedes-Benz family and look forward to building a productive and performant working relationship in the years ahead.”
The news brings to an end the team’s use of Renault engines which stretches back to the 2001 season, its final season as Benetton. Following that it became the Renault works team until it took on the Lotus name in 2012.
The Enstone-based team also used Renault engined between 1995 and 1997, and following that raced Playlife-branded derivatives of Renault’s V10s.
View the updated list of 2015 F1 drivers, teams and engines
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Image © Daimler/Hoch Zwei