Speculation over the Frenchman's future has been rife in recent months but despite a backdrop of supporter unrest, he has now committed to the club with a fresh deal that will extend his reign to almost 23 years.
Wenger, 67, had come in for criticism after a run of seven defeats in 12 games saw the Gunners drop out of the Premier League title race and suffer humiliation in the Champions League as they were thrashed 10-2 on aggregate by Bayern Munich.
But it was confirmed on Wednesday afternoon that he will remain in his role until at least 2019.
"Arsenal Football Club and Arsene Wenger have agreed a two-year extension to his contract as manager," a statement on the Arsenal website read.
"Arsene and chief executive Ivan Gazidis have conducted a full review of our on and off the pitch activities to identify areas for improvement to build a sustained title challenge."
Wenger said he was optimistic for the future and said work was under way to plan for a title challenge next season - with Arsenal having not lifted the Premier League trophy in 13 years.
"I love this club and I am looking forward to the future with optimism and excitement," the Frenchman said. "We are looking at what we do well and how we can be stronger everywhere.
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