The event - The 888.com World Snooker Championship - is the highlight of the snooker calendar.
Held since 1977 at the Crucible Theatre in Sheffield, the event draws the best players from around the world, with the world's top 16 seeded players joined by 16 more that have battled through the qualifying rounds.
The deal marks the end of a long-term relationship with tobacco sponsor Embassy.
In 2005, the final was watched by a peak audience of 7.8 million on UK public broadcaster, the BBC.
888.com is said to be looking forward to working closely with World Snooker to give a new, modern look and feel to the event, with "exciting plans to develop an innovative programme of promotional events in order to build its association with the event and snooker fans".
Beginning with the 2006 Masters, 888.com has also become an associate sponsor for the other premier UK events in the snooker calendar, the Masters, Grand Prix and UK Championship.
888.com's chief executive, John Anderson, said: "Snooker is a national institution in the UK and is booming overseas, and we are excited to be playing a part in taking the sport into a new era."
Sir Rodney Walker, chairman of World Snooker, said: "This announcement comes at the end of a very good nine months for snooker. We have secured the future of the World Championship at the Crucible, the traditional home of snooker, we have signed a five-year agreement with BBC TV to ensure that the World Championship and the other main snooker tournaments remain on terrestrial television, and now we are able to reveal this new multi-million pound sponsorship."
He added: "I believe this is the first step in a transformation which will change the commercial face of snooker in the future."
The sponsorship was brokered by sports marketing giant IMG/TWI.
World Snooker has also announced that SAGA Insurance will be the title sponsor of the Masters, held at Wembley Conference Centre.
SAGA is the UK's leading provider of products and services specifically designed for people aged 50 and over. With more than 2 million customers SAGA provides insurance, financial services and holidays, publishes the monthly SAGA Magazine and owns and operates three radio stations.
The SAGA Insurance Masters features the world's top 16 players and two wild cards.
