One-time England target Luiz Felipe Scolari has signed a new two-year contract with Portugal, keeping him in charge of the team until after Euro 2008.
The Portuguese Football Federation announced the Brazilian's decision to stay through its website on the same day that it emerged in his home country that he had been invited to return to South America as Brazil coach.
Scolari was courted by the Football Association to succeed Sven-Goran Eriksson as England boss but announced before the World Cup he was turning them down.
He then went on to lead Portugal to a penalty shoot-out win over England in the quarter-finals in Germany, before losing to France in the semi-finals.
The 57-year-old had led Brazil to World Cup glory in 2002 before taking the Portugal job a year later.
He led the side to the final of Euro 2004 on home soil, but suffered a surprise defeat to Greece.
The loss to France in Germany was a first defeat in 18 games for Scolari's side, and their run saw him set a new record for a coach of 11 straight wins in World Cup matches.
Portugal kick off their qualifying campaign for Euro 2008 against Finland on September 6.