The 44-year-old had said he would stay with the Royals regardless of the final result in May and has stuck to his word.
"I am the type of person who is committed to what I want to achieve. So I am more than happy to sign a new contract here, because I've been so happy during my time over here," Stam told the club's website. (www.readingfc.co.uk)
The former Netherlands defender previously worked at Ajax Amsterdam as an assistant manager.
(Reporting by Aditi Prakash in Bengaluru; Editing by Hugh Lawson)
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