The 57-year-old Brazilian's current deal was set to expire at the end of the month but the federation gave no financial details of his new terms.

He had been linked with several other international and club jobs and a Brazilian newspaper report had claimed the former Brazil manager, who won the World Cup with his country in 2002, had turned down the chance to manage them again.

O Globo said Brazil's football confederation president Ricardo Texeira offered Scolari the post after Portugal's World Cup third-place play-off defeat against Germany last week.

But he apparently refused the chance to replace Carlos Alberto Parreira for family reasons.

Scolari led Portugal to a fourth place finish at this summer's World Cup and also took his side to the final of Euro 2004 on home soil.

Portugal's run to the World Cup semi-finals in Germany equalled their previous best performance at the tournament, when they made the last four in 1966 before losing to England 2-1.

Scolari took charge of the Portuguese squad in January 2003 and renewed with the Portuguese football federation for two-years for the first time shortly after Euro 2004.

He will now lead Portugal during its 2008 European Championships qualifying campaign.

Portugal is in Group A along with Belgium, Finland, Poland, Serbia, Azerbaijan, Armenia and Kazakhstan.