Nielsen (right) has guided Australia through a period of change
Tim Nielsen has agreed to stay on as Australia's head coach until the conclusion of the 2011 World Cup.
The 40-year-old, who succeeded John Buchanan in 2007, had been out of contract after the 2009 Ashes but will now stay on for a further two years.
"We're obviously delighted that Tim's going to be with us for this extended period," said Cricket Australia chief executive James Sutherland.
"We know players and administrators have great confidence in his ability."
Nielsen has guided the team through a difficult period of transition, with Adam Gilchrist, Glen McGrath and Shane Warne all having retired, ending an era of undisputed world dominance by Australia.
They currently trail South Africa 1-0 heading into the Boxing Day Test, the first time Australia have found themselves behind after the opening Test of a series since the West Indies tour of 1987-88.
If they go on to lose the three-Test series, it will be their first series defeat at home since they went down 2-1 to the West Indies in 1992-93.