MATTHEW Knights will remain coach of Essendon until at least the end of 2012 after signing a contract extension with the club on Tuesday.

Knights, 38, has just completed his second year of an initial three-year term that followed Kevin Sheedy's 27-season reign, which ended in 2007.

This year, the former Richmond captain led the Bombers to their first finals campaign since 2004, after he firmly promoted a youth policy that saw veteran forwards Scott Lucas and, later, Matthew Lloyd retire.

"I am very excited about the direction this football club is heading," Knights told the club's website.

"We have unearthed a number of talented young players this season but there is still a lot of hard work to be done - we are under no illusion about that.

"I want to thank the club for the opportunity to keep working with the playing group to try and achieve premiership success."

Essendon's new chief executive Ian Robson, who officially took over from the retired Peter Jackson this week, said the club supported Knights' vision.

"The club believes that this young Essendon squad is clearly heading in the right direction," he said.

"We are confident that Matthew will continue his good work with them as we build towards our next period of sustained success.

"He has taken the team into the finals in just his second year as coach and has the squad playing exciting football, so this signing is great news for the club.

"We believe that the next few years will be very exciting for all Essendon supporters and this contract extension gives Matthew time to bring this young group through together."

The new contract will see Knights complete at least five years as coach at Windy Hill.