Jose Mourinho of Real Madrid talks to the media during a press conference.
The 49-year-old, who joined Real in May 2010 on a four-year deal, said early in May he had no ambition to coach in new countries.
But media reports had continued to speculate on his returning to England with some linking him to a move back to his former side Chelsea.
“Real Madrid and Jose Mourinho have reached an agreement to extend the latter’s contract with the club until June 30 2016,” the club said in a statement published online.
The self-appointed “Special One” took Real Madrid to their 32nd league title last month, ending a run of three successive league crowns for bitter rivals Barcelona.
That made him only the fourth coach to have won four different league titles after taking the English, Italian and Portuguese crowns, along with Austria’s Ernst Happel, the late Croat Tomislav Ivic and Italian veteran Giovanni Trapattoni.
“At this mature level of my career, I need big challenges which force me to still try to be the best,” said Mourinho.
To remain with Real “seems to me to be the perfect challenge for the coming four years”.
“We must improve as a team and also as individuals and we must play a football that aims not only at winning matches but also winning over lovers of the game.”
Brash style
Mourinho added in typically brash style: “We have played the best football in the world even if we didn’t win the Champions League.
“But we did win La Liga, which is more difficult, by playing a fantastic style of football, something which I think is the most important.”
Mourinho hinted at a couple of off-season transfers for a squad he deemed remained “young”.
“It’s not a team on the way to extinction,” he stressed. “It’s not a team that’s playing its last high-level footballing years, quite the opposite. It’s a team that has everything to go for.
“With a couple of transfers to improve the squad we have, the team of 100 points [in the league], which I think will remain in the history of Real Madrid, deserves all our trust for next season.”
During his first season at the club, critics said the Portuguese coach’s approach was too aggressive both on the field and in comments at press conferences about rivals and referees.
In one infamous incident in August last year when Barcelona won the domestic Super Cup against Real, a brawl broke out after Marcelo was red carded for a reckless challenge on Cesc Fabregas.
During the melee, Mourinho was shown on public television poking his finger into the eye of Barca assistant coach Tito Vilanova – who has since been promoted to the top to replace departing Pep Guardiola.
‘Drained’
Guardiola (41) announced last month that he was leaving at the end of the season after a four-year reign at Barcelona, saying he felt “drained”.
Asked about the incident at the time, which earned him a two-match ban, Mourinho famously asked journalists at a post-match news conference: “Pito Vilanova? I don’t know who this Pito is.”
Mourinho has been supported through thick and thin by Real president Florentino Perez.
Former Real director general Jorge Valdano had unsuccessfully argued against Mourinho’s appointment but then found himself out of a job.
In May 2011 Perez terminated the position of director general occupied by Valdano to give Mourinho more autonomy, in what was seen as a victory for the Portuguese coach.
Spanish media reported at the time that Mourinho had demanded that Valdano, a former Argentine international, be dismissed as a condition for his staying on at the club.
Real striker Cristiano Ronaldo praised Mourinho in an interview published Tuesday in Spanish sports daily AS, calling him “the best coach in the world”.
“It’s great to work with him because, right now, he is the number one manager,” Ronaldo said. – Sapa-AFP