Roberto Mancini was rewarded for guiding Manchester City to the English Premier League title with a highly-lucrative five-year deal.
Mancini waded through controversy and egos admirably to help City to their first league title in over 50 years, with a dramatic last-gasp victory over Queens Park Rangers on the final day of the season.
The new contract will reportedly make him the highest paid manager in the Premier League, ahead of Arsenal's Arsene Wenger and Manchester United's Sir Alex Ferguson.
"I am delighted to be able to give all of my efforts to Manchester City for a further five years," he told the club's official website.
"The opportunity which exists to build on our recent success is enormous.
"Manchester City is a fantastic football club, from the owner, chairman, board and the executive team, through to the players, staff and fans.
"I am very much looking forward to the challenges and excitement ahead."
Mancini replaced Mark Hughes in December 2009, guiding City to fifth place that season. The Abu Dhabi owners backed Mancini and invested heavily in the next season, which saw City finish third ahead of Arsenal.
Mancini also guided City to their first trophy in 35 years by winning the FA Cup.
Their faith in the Italian manager, who enjoyed much success with Inter Milan, was duly rewarded when City beat their Manchester neighbours to the title on goal difference last season.
Interim chief executive officer John MacBeath said that the club was extremely happy to retain Mancini. "Roberto's managerial credentials have been well proven in Europe for many years," MacBeath said.
"And in leading a team which has won the FA Cup and an unforgettable Barclays Premier League title in successive seasons, his ability to manage in the English domestic game is also undisputed.
"This new agreement allows Roberto to focus on the challenge of guiding a team which is capable not only of defending the Premier League title, but one which can compete for European honours."
Mancini will now look to add to an already strong squad with Arsenal captain Robin Van Persie topping their list. City are ready to offer the Dutchman, who announced he would not sign a new contract with the Gunners, nearly £250,000 a week wages ($347,000).
City will have to, however, offload some of their high-earning members, with the club looking to find buyers for the likes of Emmanuel Adebayor, Roque Santa-Cruz and Edin Dzeko.
