The Brazilian - linked with Barcelona earlier this season - has agreed to a four-year deal at Stade Louis II, while Almamy Toure has signed fresh terms until June 2019
The 21-year-old, who has spent the past two campaigns on loan with the Ligue 1 side, has established himself as a key component of Leonardo Jardim's side.
Despite admitting to being flattered by rumours linking him with Barcelona, Fabinho - who has been named in the Brazil squad for the Copa America - has agreed a four-year contract with Monaco.
"Fabinho has demonstrated his talent since his arrival and we are happy to integrate him definitively at AS Monaco," club vice-president Vadim Vasilyev told the club's official website.
"His versatility, his youth and his state of mind make him a player with a great future. It's also a pleasure to help him reach the Brazil national team."
Monaco have also announced that highly-rated 19-year-old Almamy Toure has signed a new deal to keep him at the club until June 2019.
"Almamy Toure is a product of our academy and an important player to keep," said Vasilyev.
"He has already shown he can be a promising player for AS Monaco. We hope he'll continue to grow under the direction of the coach."

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