African Union (AU) troops will stay in Sudan's Darfur region until the end of 2006 at the United Nations' request, the union's summit has agreed.
Mr Annan said he was still expecting UN troops to deploy in Darfur
However, Sudanese leader Omar Hassan al-Bashir refused a UN request to allow its peacekeepers into Sudan.
The AU originally planned to pull its troops, who are overseeing a ceasefire after three years of conflict, out of the troubled region in September.
UN Secretary General Kofi Annan said he hoped a UN deployment would take place.
Speaking at the AU summit in the Gambian capital Banjul, Mr Annan described the situation in Darfur as one of the worst nightmares in recent history.
"On the request of the secretary general, the African Union will continue to fulfil its mission until the end of the year," said Republic of Congo President Denis Sassou Nguesso, the current holder of the revolving AU presidency.
About 7,000 troops from the AU are currently taking part in peacekeeping missions in Darfur. Tens of thousand of people have died there in three years of conflict, most killed by pro-government militias.
Western powers are pushing for a UN peacekeeping mission to take over from the African troops, and Mr Annan said he was confident this would happen eventually.
"In the world of politics, things change. We hear 'never,' 'forever,' and yet it does come around," he said.
Sudan has resisted the deployment of UN troops in Darfur
"And so I'm still expecting that in time there will be a UN peacekeeping force deployed to Darfur.
The summit closed on Sunday.
Rival factions in the Darfur region signed a partial peace agreement in May, but the situation remains volatile.
Some 200,000 people are thought to have died in Darfur, a vast region in the west of Sudan, in the conflict.
Most have died in attacks by pro-government militias against civilians.
Rebel forces took up arms in February 2003, accusing the government of discriminating against Darfur's black Africans in favour of Arabs.
A partial peace deal was agreed in May, but not all sides signed the agreement and fears have grown over worsening conditions in camps home to displaced people.
The International Criminal Court was set up by the UN in 2002 to prosecute individuals for war crimes, genocide and crimes against humanity.