The 56-year-old Spaniard has agreed a new three-year deal after opting against exercising a release clause open to him in the event of relegation that was in his initial contract signed in March.
“I am extremely pleased to be staying at Newcastle United,” said Benitez.
“The love I could feel from the fans was a big influence for me in my decision to stay, as was my relationship with (managing director) Lee Charnley and all the staff.
“This is a huge club and I wanted to be part of the great future I can see for Newcastle United.”
Former Liverpool manager Benitez is generally well-regarded by many Newcastle fans after being handed a tough job in keeping the Magpies in English football's top-flight.
Benitez, previously in charge of Real Madrid, took over on Tyneside when Newcastle sacked former England manager Steve McClaren with 10 Premier League games left in the season, but could not stop them dropping down to the Championship for the second time in seven years.
Newcastle's relegation was confirmed when north-east rivals Sunderland beat Everton before this month's final day of the season.
But soon afterwards Benitez indicated he wanted to stay at St James' Park, provided he had sufficient control over football issues.
Newcastle owner Mike Ashley, much criticised by fans' groups for his running of the club, has now given Benitez that authority, with a club statement saying: “Newcastle United are delighted to confirm that Rafa Benitez will remain as Newcastle United manager, after signing a new initial three-year contract.
“On Wednesday afternoon, the Spaniard put pen to paper on the deal which will keep him on Tyneside until at least the summer of 2019.
“Benitez will have day-to-day responsibility for all football-related matters at the club.”
Charnley added: “When we brought Rafa to the club in March, we knew he was a phenomenal manager and everything we have seen from him since has only served to reinforce that.
“We are therefore delighted to have secured his services for the next three years and I believe with Rafa as manager, it gives us the best possible chance of returning to the Premier League at the first time of asking.
“As a world-class manager, we had no doubt in our minds as to the importance of retaining him at Newcastle United.” – AFP
Original source: Benitez confirms Newcastle stay