Just days after losing captain Fabio Cannavaro for Euro 2008 because of a serious ankle injury, the 44-year-old Donadoni has given the national team some stability.

The extension had been agreed last month with the Italian Football Federation ahead of Donadoni's team selection announcement.

Donadoni said back then: "The contract extension was never a problem for me but this is a reward that makes me extremely happy."

Donadoni has earned his new deal after stepping into the very big shoes left by predecessor Marcello Lippi.

As a player, he won 63 caps for Italy and achieved greatness with AC Milan but as a tactician, his experience was minimal.

He began his coaching career in 2001 and spells at Lecco, Genoa and Livorno were all he had under his belt.

His appointment back in 2006 was received with astonishment.

Donadoni has had to earn the trust of the nation since day one and it has been a test for the youngest ever coach of the national team.

Many expected the Italians to struggle in their qualifying campaign for this summer's European Championship following their World Cup triumph in Germany two years ago.

However, the Azzurri finished first of their group ahead of France by winning nine of their 12 games and only conceding one defeat in the qualifying campaign.

"Donadoni is a young coach but already a great through his maturity, competence and preparation," said Italy Football Federation president Giancarlo Abete on Wednesday.

"Now there is nothing more to be done and we can concentrate on the games."

The new deal includes a clause which allows the extension to be terminated by either party should results at Euro 2008 be deemed unsatisfactory.

However, Donadoni can now concentrate on Italy's challenging games against the Netherlands, Romania and France.

The former AC Milan star will be hoping to join France in becoming the second nation to add a European Championship to the World Cup title when his side begin Euro 2008 against Holland on June 9.