He helped keep the club up this season
Swansea head coach Francesco Guidolin is staying at the club.
After taking over on a short-term deal in January, the Italian has signed a new two-year deal.
The club were hovering around the Premier League's relegation zone when he took the job but they are now 11th.
"It's going to be another challenge for everyone, but we are looking forward to seeing how far he can take this squad of players over a full season," said Swansea chairman Huw Jenkins.
"There has obviously been a lot of speculation over recent weeks about a possible change of manager, but the board has been impressed with the way he has quietly gone about the job of improving performances and results since January."