The former Fulham and Real Sociedad manager, whose previous deal was set to expire, has extended his contract and will oversee the Dragons' Euro 2016 qualification campaign
The 43-year-old's future had been the subject of much speculation following a disappointing World Cup qualifying campaign, which saw Wales finish second from bottom of Group A.
Coleman, who assumed the role in January 2012, was strongly linked with the managerial vacancy at Premier League club Crystal Palace, but will now remain in charge of his country as they look to qualify for Euro 2016.
The Welshman confirmed he had no contact with Palace and expressed delight at committing his future to the national side.
"I have always stated that this is the best job in the world as far as I am concerned," he said.
"There has been a lot of speculation about me over the past couple of weeks but this was the one job I wanted. I feel that we have unfinished business.
"There were issues I wanted to discuss with the Football Association of Wales, likewise the FAW with myself, and those have now been resolved.
"I am excited about leading my country into the European Championship qualifiers. The work starts now with Saturday's game against Finland.
"There is the need for stability and now we can move on to the next qualifiers and hopefully end the year on a high with a win over Finland."