The Chilean coach appeared to be on his way out of the Primera Division side following their recent financial problems, but has now made the decision to stay put after all
The former Real Madrid coach was contemplating leaving the Primera Division side due to their recent ownership issues, but he has nonetheless pledged his future to the Andalucian club.
"I will continue here to try to help Malaga. We are very excited and are working very hard day after day to reach the Champions League," Pellegrini said at a press conference.
"We have worked well during pre-season to put a good team together. We are only thinking about the Champions League now."
Malaga finished fourth in La Liga last season, but have been forced to sell players such as Santi Cazorla and Salomon Rondon, while Joris Mathijsen is believed to be on his way out of the club as well.
Qatari benefactor Abdullah Al Thani is reportedly unhappy with the way television rights are distributed in the Spanish top-flight, and he now appears reluctant to continue putting money into the outfit.
Malaga were paired with Panathinaikos during Friday's Champions League play-off draw in Nyon.