Ferguson made the announcement on the training ground on Tuesday morning, according to defender Mikael Silvestre.

"It was a good surprise. We didn't expect to know who was coming in before the end of the season," said the France international.

"Now we know and it was announced by the coaching staff this morning after training.

"He (Ferguson) said: 'It won't be a secret anymore so I have to tell you that I'm staying on as manager'."

The club have only confirmed so far that they are in talks with Sir Alex Ferguson about renewing his contract as manager.

The Old Trafford boss was due to retire at the end of the season.

But Ferguson has made a huge U-turn and now looks certain to extend his 15-year reign at the club.

Silvestre said that Ferguson had not revealed how long his new contract would be.

"I don't know how long he's going to stay on, one year more, two years more or whatever, but it's good that I'll continue to work with him," Silvestre said.

"He isn't staying to relax himself. This season was supposed to be his last season, but now it's not so.

"Every season under him we're going to play for everything."

United issued a statement to the Stock Exchange confirming that the club is in talks with the 60-year-old.

"The board of Manchester United PLC confirms that it was recently approached by Sir Alex Ferguson on Sir Alex remaining as manager of the club beyond this season," the club said in a statement.

"The board has entered into discussions with Sir Alex and his advisors on a new contract.

"These discussions are continuing and a further announcement will be made in due course."

Manchester United chief executive Peter Kenyon began the search for Ferguson's successor at the start of the year.

Kenyon repeatedly stated that he wanted Sir Alex to remain as United's manager.

Leading names Ottmar Hitzfeld, Fabio Capello and Sven-Goran Eriksson headed the list of possible long-term replacements for Ferguson.

Most of the leading candidates are under contract until the end of the 2002/03 season and the search for a successor has now been suspended.

Ferguson is said to have shocked the Old Trafford board with his change of mind after watching his side's impressive 4-1 victory over Sunderland.

Ferguson had set his sights on bowing out in May by winning the European Cup in Hampden Park in his native Glasgow.

Unprecedented achievements

But an even bigger lure could be the prospect of going out by winning the 2003 Champions League final at Old Trafford.

Knighted in 1999, Ferguson is considered among the greatest British managers of all time.

Under him, the club have won seven Premiership titles, four FA Cup triumphs and in 1999 an unprecedented treble of the league, FA Cup and Champions Cup.

United winger Ryan Giggs said: "I always thought it would be hard for him to walk away from Old Trafford.

"He's lived and breathed Manchester United for so long that is has become a way of life for him."