Speculation had been mounting about Guardiola's future at Barca with the 39-year-old's existing contract running out this summer, but yesterday's announcement at a Nou Camp press conference should bring an end to that – at least for the time being.
Guardiola's new deal will tie him to the Spanish, European and world champions until the end of the 2010/11 season, although the agreement will not be signed until after this summer's presidential elections.
"Nowhere am I going to be better than I am here," said Guardiola, who as a player and former captain with Barca represented the club between 1990-2001 and won six league titles, the European Cup and two Copa del Reys among a host of other trophies. Guardiola did concede, though, that there was likely to be a time limit for his tenure in charge of the club.
"I know that sooner or later I will cease to be coach of Barca and I have to enjoy the time I'm here to the maximum," he added. "A coach of Barca can't be here for life just because I think you have to sign for short periods during which the coach has to earn things, with the players, with the fans.
"I wanted to see if that was happening, if I had the support of the players, the board. I feel strong enough to carry on. I don't want to be here for what we've done but for what we must do now."
Guardiola has been a revelation since being promoted from Barca's B team in the summer of 2008 to replace Frank Rijkaard in charge of the senior team. In his first season in charge, Guardiola helped Barca become the first Spanish team ever to win the treble of Champions League, Primera Division and Copa del Rey.
Then the all-conquering Catalans added three more trophies in 2009 to cap their record-breaking year, winning the Spanish and European Super Cups last summer and then picking up the Club World Cup in December.
In total, Barca have won 67 of their 95 competitive matches under Guardiola, losing just nine times, while scoring an average of more than 2.4 goals per game.
Guardiola, who has recently been linked with a move to Manchester United as a possible replacement for Sir Alex Ferguson when the Scot steps down at Old Trafford, admits he would have preferred to wait until the end of the season to make any announcement about his future.
However, he felt recent events, primarily last week's Copa del Rey exit at the hands of Sevilla, had changed things. "It (the cup exit) makes the weeks seem longer. It had created a situation that was already uncomfortable for everyone – we had to kill the issue," he said.
Barca president Joan Laporta, who said this weekend that he wanted a decision from Guardiola on his future by Easter, was delighted to secure the ongoing services of someone he believes is the top coach in the game.
"I think that it's very good news for everyone associated with Barcelona because we all wanted Pep to continue," Laporta said.
"He doesn't like me saying it, but Pep Guardiola is the best coach in the world and we are proud to continue to have him here."
Laporta also insisted that this summer's elections had no influence on yesterday's announcement regarding Guardiola.
"The electoral process is independent of all this," he said.
"This leaves us very calm and, putting myself in the shoes of the possible (presidential) candidates, I think they will have peace of mind of knowing who the coach will be and they will only have to be concerned about establishing the conditions and length of his contract."
Whereas Guardiola's immediate future has been settled, that of sporting director Txiki Begiristain remains in the air.
Begiristain, who attended yesterday's press conference along with Laporta and Guardiola, said: "I'm this president's man and I don't want to talk about anything after he's left. The most important thing is to leave everything in place and that the majority of the group around the coach stays on. I won't rule out staying on. I'll be giving it some thought."
Regarding Guardiola's decision, Begiristain added: "We're very happy. It was very important the manager who'd guided the team for the last 18 months stayed on next season. We had hoped to agree a longer deal, but we completely understand Pep's reasons."