The Frenchman put pen to paper on a deal tying him to Highbury until 2005 after months of negotiations.

Wenger, who had been touted as a possible successor to United manager Sir Alex Ferguson, said: "I have decided to stay because I believe because I have group of players who I respect and admire.

"There is a lot of potential to bring the club to where it wants to be - the top club in Europe and in the world.

"The board have shown that kind of ambition and that's why I've decided to stay."

He added: "I believe the club has a huge potential fans-wise.

"The fans have always been loyal to me since I've been here and I think there are 70,000 to 80,000 people ready to watch Arsenal every week."

Wenger has always insisted he was staying at Arsenal, despite being linked with Manchester United, Barcelona and a possible return to France or Japan.

He had been linked, along with England coach Sven-Goran Eriksson, as a possible successor to Sir Alex Ferguson at Old Trafford.

And the Arsenal board has never wavered from the conviction that Wenger would sign a new contract.

Wenger, 52, joined Arsenal in September 1996 and guided the Gunners to a League and FA Cup Double in 1998, after which he signed a three-and-a-half year deal.

Wenger had just six months to run on his existing contract and his delay in agreeing a new deal prompted endless questions about his future.

The decision comes only days before Arsenal expect to get the go-ahead from Islington Council to start work on a new �250m stadium at Ashburton Grove.

Wenger has always claimed the future of the club is linked with the hope of leaving Highbury for a new 60,000-seater stadium.

And the Frenchman has recently spoken of his optimism about Arsenal's playing future, and he was delighted with the performance in the outstanding 3-1 Champions League win against Juventus at Highbury.