The Swede held talks with FA officials on Monday following successive weeks of detrimental revelations in British newspaper the News of the World.

The FA reached a compensation deal with Eriksson, whose contract was due to expire in 2008, British media reported on Monday.

FA chief executive Brian Barwick believes the decision was made for the benefit of English football.

"The FA and Sven felt it was important to clarify his future. This is for the benefit of everyone connected with English football, especially the fans," Barwick said on the FA's website.

"There has been so much speculation surrounding this matter in recent weeks and months, it was important to resolve it now.

"This is the right outcome and I would like to thank Sven and his advisors for their tremendous co-operation,” he said.

Barwick explained the decision had nothing to do with the Swede’s credibility as a coach, stating that Eriksson is “definitely the man to lead England in Germany”.

"As I have said before, our main objective is giving Sven and the England team the best chance of achieving success at the World Cup,” said Barwick.

"Now is the time for everyone to get behind the team as we prepare for a tournament that presents us with a genuine chance of success," he added.

Eriksson became the first foreigner to coach the England national team when he took over from Kevin Keegan in 2000.

The 57-year-old coach commented on the decision saying: "I am happy that we have reached this agreement and can now continue our preparations for the World Cup."

I know that I have the full support of the players and The FA and it is important to stress to everyone just how committed I am to achieving success this summer," Eriksson said in an FA statement.

"I care passionately about this job and I want everyone to know that. I have always enjoyed the incredible support of the fans and I know how important they will be to us in Germany.

"This summer is the culmination of everything we have been working towards over the last five years. Let's go and win the World Cup."

Eriksson’s six-year spell in charge of the Three Lions was filled with controversy.

The former Lazio coach was linked to jobs at Manchester United and Chelsea, forcing the FA to extend his contract in 2004.

Stories about Eriksson’s personal life, including affairs with TV personality Ulrika Jonsson and former FA secretary Faria Alam made the tabloid headlines.

Eriksson’s commitment to England came to question when he and his advisors fell victim to a newspaper sting in which a journalist, posing as a rich Arab businessman, offered him a new job.

The Swede was quoted as saying he was prepared to ditch his England job and made allegations regarding a number of Premier League managers and players.