In January, with Barcelona on a miserable run of form, Xavi said he would walk away from his post in the summer despite having a year left on his contract.
However this week, after a meeting with president Joan Laporta and the board, Xavi pulled off a dramatic U-turn and decided to stay, despite the club poised to end the season trophyless.
Barcelona were knocked out of the Champions League by Paris Saint-Germain last week and lost against Real Madrid in the Clasico, trailing their rivals by 11 points in La Liga.
"It was a not a simple decision, in January I said (I would leave) because I thought it was best for the club," Xavi told a news conference.
"I am full of hope, these three months have made me change, the players believe in it, and wise people are willing to rectify, here I am.
"It's not about ego, or money, I have energy, I see the fans are happy and proud - it's a cocktail of reasons, above all the confidence of the president and (sporting director) Deco."
Xavi said although the team he took to LaLiga glory last season have failed to achieve their objectives, they have now proved they can equal Europe's best sides.
"Above all I said yesterday to Deco, the president... that the team has improved a lot," explained Xavi.
"Two years ago we went to Bayern (Munich) and I had the feeling that we weren't up to it. Now I think we're in shape to compete with the biggest teams in Europe.
"I have the feeling that this year (the Champions League) escaped us by just a couple of small things, we will try again, I'm excited to - now it's in our hands."
Xavi said reports he was only staying because of money were designed to "hurt" him.
In January he claimed coaching Barcelona was "unpleasant" and "cruel", and Xavi said he did not expect that to change.
"Coaching here is very hard, but I see myself with the energy to keep leading the project," he added.
Barcelona president Joan Laporta said he was glad Xavi was staying and that it was good for the stability of the club.
"It's great news that Xavi is staying," said Laporta.
"The team we have, that is (still) consolidating, with very young players, needs that stability.
"Xavi is a reference for young players and we can see that - today I'm especially pleased, and the board have unanimously supported this decision.
“We did not discuss with any other manager as we were just waiting for Xavi to change his mind. Nothing was gonna happen with other coaches before the end of the season, the only priority was Xavi.”
