McCarthy took the reins in November with Ipswich bottom of the table and boasting just seven points from their first 13 games of the season.
But Saturday's 3-1 victory over Birmingham moved the Suffolk club into the top half of the table for the first time since August and finally secured their second-tier survival amid what has been a fiercely-contested relegation scrap.
And with Championship status now assured, McCarthy has confirmed his future lies with Town.
"I'm staying. The agreement was I'd stay if we stayed up, I'd go if we went down," McCarthy told the Green'Un. "Relegation would have been a disaster for this club and there would have been a whole host of changes.
"If somebody had said to me when I arrived that it would need 60 points to stay up when we had seven I would have said 'do me a favour, we won't get anywhere near it'. It's just been remarkable this league."
Meanwhile, Ipswich defender Tommy Smith has spoken of his pride at being named as the club's Player of the Year.
The New Zealand international told Town's official website: "It's a proud moment for me to receive this award.
"The fans have always backed me from when I was in the youth team and it's nice to get accolades like this but it's been a real team effort this season."