"Athletic Club and the coach Marcelo Bielsa have agreed to extend the contractual relationship between the two parties until June 30, 2013," Bilbao said in a statement on their website.
Known as "the mad one" for his eccentric touchline behaviour and often mystifying news conferences, Bielsa's entertaining brand of attacking football helped Bilbao reach the finals of both the Europa League and the King's Cup last season, where they lost to Atletico Madrid and Barcelona respectively.
The former Argentina coach's side suffered a poor run of league form towards the end of the season and finished a disappointing 10th in La Liga but will take part in the Europa League again due to their runners-up finish in the King's Cup.
Bilbao, who only field those of Basque origin, have a crop of talented players in their squad, including Spain pair Fernando Llorente and Javi Martinez, playmaker Ander Herrera and attacking midfielders Iker Muniain and Oscar de Marcos.
Get the best features, fun and footballing frolics straight to your inbox every week.
Thank you for signing up to Four Four Two. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.