Carlo Ancelotti has agreed a contract extension to remain as Real Madrid head coach until June 2026, the club announced on Friday.
Ancelotti, 64, returned to the club in 2021 for his second spell in charge and won a LaLiga and Champions League double in his first season back.
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His previous deal was due to expire in June 2024, and the Italian had been repeatedly linked with taking over the Brazil national team job next summer.
A source told ESPN that negotiations over a new contract accelerated after a conversation took place between Ancelotti and club president Florentino Perez on Thursday.
Ancelotti stated his conditions for an agreement -- including his preference that the club move to sign a centre-back in January, with both Eder Militao and David Alaba out long term -- and Perez accepted them on Friday, the source said.
The speed of the announcement had come as a surprise to Ancelotti's camp, the source said.
"Real Madrid and Carlo Ancelotti have agreed to extend our coach's contract until June 30, 2026," the club said in a statement on Friday.
"In his five seasons as coach of Real Madrid, he has won 10 trophies: two Champions League, two Club World Cups, two European Super Cups, one league title, two Copas del Rey and one Spanish Supercopa.
"Carlo Ancelotti is the only coach to have won four European Cups and has achieved the most victories in the history of the competition (118), and he is also the first coach to win the five major European leagues (Italy, England, France, Germany and Spain)."
Real Madrid are top of LaLiga and qualified for the Champions League round of 16 after topping their group.
"Today is a happy day. Real Madrid and I will continue our journey together looking for new, greater successes," Ancelotti said in a post on X later on Friday.
Ancelotti had faced frequent questioning about his future from the media this season, with his contract entering its final months.
"The future is tomorrow's game and then a week on holiday," he said in his last prematch news conference before Christmas. "My contract expires on June 30, that's the future. When there's news, I'll tell you."
Ancelotti is one of the most decorated coaches of all time, having won four Champions Leagues and five league titles in an almost 30-year career in management.
After spells in charge at Juventus, AC Milan, Chelsea and Paris Saint-Germain, he joined Madrid for the first time in 2013, winning the Champions League and the Copa del Rey before being fired two years later.
He returned to the Bernabeu in 2021, after coaching Bayern Munich, Napoli and Everton in the interim.
Madrid's 2021-22 season was a resounding success -- winning LaLiga and lifting the Champions League after a series of dramatic comebacks -- but the following campaign was more challenging, missing out on those two major trophies, though winning the Copa del Rey.
This season Ancelotti has helped Madrid defy an injury crisis -- with long-term absentees such as Thibaut Courtois, Éder Militão and Vinícius Júnior -- to top LaLiga at Christmas, level on points with surprise challengers Girona.
Brazil football federation [CBF] president Ednaldo Rodrigues had publicly stated his desire to appoint Ancelotti as his national team coach, but Rodrigues was removed from his post by a court earlier this month.
The Brazilian FA declined to comment when reached by ESPN.