VALENCIA, Spain (Reuters) - Pako Ayestaran has been appointed Valencia coach until 2018, the La Liga club said on their website (www.en.valenciacf.com) on Tuesday.
The 53-year-old Spaniard took over the first team in March until the end of the season after former England international Gary Neville was sacked four months into job.
Ayestaran guided Valencia to 12th place in the league standings after a relegation scare, winning three of his eight games in charge.
"Valencia CF wish to announce a new contract with Pako Ayestaran that will see him remain head coach of the first team until June 30th, 2018," the club said in a statement.
"The squad were informed of the decision this morning by chairwoman, Lay Hoon Chan, and sports director, Jesus Garcia Pitarch."
Ayestaran previously managed Israeli side Maccabi Tel Aviv, guiding them to the Premier League title in 2015.
Owned by Singaporean businessman Peter Lim, Valencia endured a difficult campaign.
Ayestaran, a former Valencia player, arrived at the club in the middle of February to work as an assistant to Neville, who had replaced Nuno Espirito Santo in December.
The former Manchester United and England defender did not pick up a league win until his 10th match in charge.
Under Neville, Valencia won just three league games and dropped to 14th place in the standings.
Ayestaran, who won the UEFA Cup and two La Liga titles in his playing days with Valencia, proved a popular choice to replace Neville and led his side to a 2-1 league victory over champions Barcelona at the Nou Camp.
Editing by Ed Osmond