Blades director Simon McCabe said: "We are delighted to announce that Kevin has accepted a contract that will see him here until 2012. Congratulations to him and we are looking forward to continuing our relationship with him.
"This is a positive move for the football club when so many managers are feeling the pressure, we feel that offering Kevin this new contract is a good strategic point for the club."
Fellow director Terry Robinson said: "Kevin is a breath of fresh air to the club, he has a plan which he has put in place and the club is going to grow. We know he is going to achieve the goal we are all aiming for and he has the full backing of the Sheffield United board and PLC."