Coleman has been in charge of Wales since succeeding the late Gary Speed in January 2012, and much had been written about his future in recent weeks after he was linked with the vacancy at Premier League club Crystal Palace.
But he told a press conference there was no interest in that role on his behalf, or any approach from the club, and he is delighted to have the chance to try and qualify for the next major tournament in France in less than three years.
"The contract has been something people have been talking about - was it going to be offered? - but I am delighted to extend it for the next campaign," Coleman said ahead of Saturday's friendly clash with Finland at the Cardiff City Stadium.
"I am thoroughly looking forward to the challenges that will come. Two years of experience at it will be better for me going into this campaign and I am delighted to have the opportunity to lead my country. I am looking forward to it.
"I was asked to sign a contract before the Macedonia/Serbia camp and I said no. In hindsight if I'd signed it, it might have taken a lot of the stuff afterwards away, but hindsight is a beautiful thing.
"That gave us the six-week period to say alright, there was so much criticism coming our way as an FA because we lost those two games, we have a chance to sit back and ask questions. Can I affect it going forward? Can I affect winning games if we don't have our strongest squad? Do I want that kind of pressure?
"It gave me time to look at it and think, when we have our strongest squad, we're a good team. Saying that, we played Macedonia and Belgium without 15 or 16 players and we had a fantastic camp.
"I think I've come to the right decision. The honour of doing the Welsh job is bigger than with any job I will ever do.
"It has been really hard at times but at other times it has been fantastic and I don't want to hand that feeling on to someone else. I want to finish what I started with these players.
"I know them better two years down the line and they are a good bunch to work with. I think we've got a good chance of doing something and I didn't want to give that up."
Asked whether Palace had been a temptation, he said: "No. Palace is a great club and I had a great time there. Everybody thinks you want to work in the Premier League, financially, media coverage, but I had five years with Fulham and have no aspirations to work there now.
"Maybe one day again in the future, yes. I've always said when my time is up with Wales I'd like to work abroad again. I learned more working abroad and that's where I see myself.
"I wasn't tempted about Crystal Palace and the only job in my thinking has been Wales."