McDermott was told on Friday evening he no longer had a job as Massimo Cellino's takeover at Elland Road moved closer.
It later emerged the solicitor who spoke to McDermott had no authority to sack him given a takeover is not yet complete.
And the club's current regime clarified the situation shortly after Leeds beat Huddersfield 5-1 to record a first win since mid-December.
A statement on the website read: "The club would like to make it clear that Brian McDermott remains our first team manager.
"He has not been dismissed from his post as has been suggested and we look forward to him continuing in his role with us in taking Leeds United forwards."
The League Managers' Association earlier released a statement which said McDermott was staying away from the Huddersfield game on legal advice.
It read: "Brian received a call last night from a solicitor informing him that Leeds United were terminating his contract as manager.
"This morning Brian received a further phone call from a director of the football club stating the company on whose behalf the solicitor had contacted Brian are not the owners of Leeds United.
"In the circumstances, Brian was asked by the directors of the club not to take the match."
Italian Cellino has struck a deal to buy 75% of club shares from Gulf Finance House Capital, but the takeover is subject to Football League approval.
A League spokesman said discussions with Cellino's group are ongoing.
In the meantime McDermott's no 2 Nigel Gibbs took the team against Huddersfield and not, as was expected at one stage, former player Gianluca Festa - a lifelong friend of Cellino.
The events added to a farcical 24 hours at Leeds, with GFH confirming on Saturday they had agreed to sell their majority stake. Cellino had already made his presence felt by attempting to remove McDermott on Friday night.
The ex-Reading manager refused to allow Festa to sit with him in the dugout against Ipswich in midweek and did not want a number of Italian players given to him by Cellino.
The mayhem continued as two of the club's main sponsors, Enterprise Insurance and Flamingo Land, said they would be withdrawing their backing.
And police were called to Elland Road on Friday as fans did their best to barricade Cellino inside the ground after some late-night talks.
None of that has stopped GFH Capital from choosing Cellino's bid over one from rival consortium Together Leeds, though.
A statement read: "Following recent media reports and speculation, GFH Capital would like to confirm that it has agreed to sell a 75% stake in the club to Eleonora Sport Ltd, a company owned by the Cellino family who have many years' experience in football and who plan to invest substantially in the club including the re-acquisition of Elland Road.
"The Cellino family is a well known Italian sports family, who have owned Serie A side Cagliari since 1992. They come to English football with an ambition to support Leeds United financially to take it to the Premier League and a belief that the club can sustain top-flight status.
"Since the agreement, Leeds United is in discussion with Eleonora Sport Ltd on a number of issues concerning club matters, including the structure of the management of the first team."
Cellino became the number one bidder when on Thursday, a consortium of club managing director David Haigh and Enterprise Insurance boss Andrew Flowers collapsed after two months of exclusivity to buy the club under the guise of Sport Capital.
Cellino could still face opposition from the Football League - he has a previous conviction for fraud - while a consortium headed up by former Manchester United director Mike Farnan says it is refusing to go away despite the statement.
"We continue to seek dialogue and have substantial backing with offers of support increasing by the minute," Farnan tweeted.
The Italian influence at Elland Road continues to grow despite that, though, with Cagliari confirming that Leeds had signed midfielder Andrea Tabanelli on loan from them, with Leeds later adding him to the squad list on their website. He was not named to face Town, though.
Cellino, 57, is an agricultural entrepreneur and is known in Cagliari as 'The King of Corn'. He has owned Cagliari for 20 years and had 36 managers in that time.