Magnussen's arrival means Esteban Gutierrez is currently without a drive, the Mexican having confirmed earlier this weekend that he would not drive for the team next year.
Team founder and chairman Gene Haas predicted the team's new line-up would help drive them forward amidst heavy regulation changes in 2017.
"From the time we began looking at drivers, Kevin Magnussen was always on our short list," Haas explained. "He's accomplished a lot in a very short period of time, and we feel like he can accomplish a lot with us.
"Our second season will bring a new set of challenges, and we feel that pairing Kevin with Romain will help us develop our new car and continue our growth.
"We wanted an experienced driver capable of developing our car and our race team into one that can score points and better itself each race and each season. Romain has done a very good job of that and he's played a large role in bringing respect and legitimacy to Haas F1 Team. His veteran leadership will again prove valuable [next year].
Haas also paid tribute to Gutierrez, adding: "I want to thank Esteban for all of his efforts. He's been an instrumental part of our first year in Formula One and we're looking forward to finishing the season strong with him and Romain."
Magnussen, who had also been in negotiations to remain at Renault, said Haas's strong vision had helped convince him of the benefits of switching.
"This is a fantastic opportunity and I'm very happy to be a part of Haas F1 Team," he said. "Obviously, I'm confident in my abilities as a Formula One driver, but I'm also very confident of what Haas F1 Team can do in its second season and every season thereafter.
"Gene Haas has come into Formula One with a strong vision and a different way of doing things. He's making it work and work well. I've had a good vantage point all season long, and I'm looking forward to getting behind the wheel of next year's Haas VF-17."
Grosjean - who has scored all 29 of Haas's points in their maiden season - added: "A little more than a year ago I made my decision to join Haas F1 Team and it was absolutely the right decision. I'm very proud to be a part of the team's development and am very happy we can continue to grow and achieve more success in the years ahead."
Both Magnussen and Grosjean have claimed Grand Prix podiums before - Magnussen finished second on debut in 2014, while Grosjean has finished inside the top three on 10 separate occasions. The Frenchman also reached his 100th F1 start this year in the United States.
The pair's confirmation at Haas means just four seats are now available for 2017 - at Sauber and Manor.