There were concens about the slot of Nightline

The 54-year-old presenter put paid to speculation about his future as he returned home from a Caribbean holiday.

"I've never been in a situation like this in my life," he said. "The whole thing has made me dizzy".

"We are thrilled that CBS will continue to be the home of David Letterman," said CBS in a statement.

Some industry analysts had expressed their concern that a defection to ABC would have forced the network, owned by Disney, to axe or push back its highly-regarded and long-running news programme, Nightline.

But ABC president Alex Wallau confirmed that Nightline would remain in its time slot.

'Pretty good'

"I would like to finish my career, a week from Tuesday, at CBS," Letterman joked during recording of his programme, Late Show, on Monday.

When Letterman's audience applauded his announcement, he added: "I know it sounds pretty good to you, folks, but there goes the vacation to Disney World."

Trade magazine Variety reported Letterman would receive about $31.5m (�22.2m) in the first year of the new contract, with annual increases.

It reported that CBS will also continue to pick up production costs related to the Late Show programme and Letterman's production outlet Worldwide Pants.

The magazine added that Letterman had won assurances from CBS that the programme would be better promoted and that CBS-owned stations would shift seamlessly from their local news programmes into Late Show, a technique used to hold onto an audience.

The deal is said to be not financially much bigger than Letterman's previous contract.