The Italian champions - who confirmed the news on their official website, www.inter.it, this evening - also revealed Figo would take up a role as an international ambassador for the club when the new deal expires in June 2008.

The 34-year-old Portuguese player had been linked with a move to Saudi Arabia despite Inter's willingness to keep him for another campaign at the San Siro.

Figo, who joined Inter from Real Madrid in 2005, came close to signing for Saudi champions Al Ittihad during the winter transfer window, but the deal fell through.

The news ends the hopes of LA Galaxy general manager Alexi Lalas, who this week confirmed he would love to pair David Beckham with Figo in the MLS next season.