Widespread reports on Sunday claimed that the striker had agreed to a deal worth 300,000 pounds per week, and United has now announced he will stay at Old Trafford and will become a club ambassador when he retires.
"I am made up to be staying at United," Rooney told the club's official website. "In August I will have been at the club for 10 years and during that time I have played with some fantastic players and won everything that I hoped I would when I first signed. I now have the chance as one of the club's senior players to help the younger players coming through and to be a part of another great United team.
"The fans have always been a huge part of this club and the support they have given me since my debut against Fenerbahce has been amazing. I am very grateful to all United fans around the world for their continued support.
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"I am really excited to be a part of the club's future and want to thank David Moyes and Ed Woodward for their belief and support in me. I am convinced that this is the start of another successful chapter in Manchester United's history."
Chelsea had two bids for Rooney rejected last summer but United, in particular manager David Moyes and new executive vice-chairman Ed Woodward, were adamant that he would not be allowed to leave.
Goal had previously reported that Rooney had been uninterested in extending his stay as recently as December.
But reports have suggested that the club record £37.1 million purchase of Juan Mata, as well as the possibility of succeeding Nemanja Vidic as captain, have persuaded him to remain at the club he joined from Everton in 2004.
“Wayne has been the best player in England since I put him into the Everton first team in 2003," said Moyes. "Since becoming United manager in July last year, I have enjoyed working with him and seeing just how he has developed his incredible talent. With his ability, his experience and his desire to succeed, he is a vital part of my plans for the future and I'm absolutely thrilled he has accepted the challenge.
"I said last July that Wayne has an outstanding chance to be a true legend of this club's long and rich history. He is just 42 goals away from overtaking Sir Bobby as our record goalscorer and becoming the first United player to hit 250 goals for the club. These opportunities only come to special players and I'm confident Wayne will set a new record that will take decades to reach. These are really exciting times for everyone connected with the club."