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Xavi will remain as coach of Barcelona, the Spanish giants told AFP on Wednesday, despite having announced in January that he planned to quit at the end of the season due to the "cruel and unpleasant" nature of the job.
Spanish media reported that the 44-year-old, who had signed a contract extension until 2025 last autumn, decided on his dramatic change of mind after a day of meetings with club president Joan Laporta and sporting director Deco.
Xavi's decision comes just a week after Barcelona were knocked out of the Champions League in the quarter-finals by Paris Saint-Germain.
On Sunday, the defending champions fell 11 points behind Real Madrid in La Liga's title race following a 3-2 Clasico defeat to their bitter rivals.
Former Barcelona midfielder Xavi said he felt "liberated" when he made his decision to stand down.
He had repeatedly said the job was his "dream" but admitted the pressure of the role eventually proved too much.
"You are made to feel every day that you are not good enough," he said after a shock 5-3 home loss to Villarreal.
"It happened to all the coaches: Pep (Guardiola) told me, it happened to (Ernesto) Valverde, I saw Luis Enrique suffer."
He added: "You often feel there is lack of respect, you feel that your work is not appreciated. It wears you down in terms of health, of mental health, your mood, your emotional state. I am a positive guy but the energy goes down, down, down, until the point at which you say: it makes no sense. It makes no sense to continue."
Barcelona, who have struggled with financial issues in recent seasons, appointed Xavi as boss in November 2021 and he helped turn their fortunes around, lifting the league title last term.
But this season they were also thrashed 4-1 by Real in the Spanish Super Cup and were dumped out of the Copa del Rey by Athletic Bilbao.
"The announcement liberated me on a personal level," he said in January.
"From June 30 I will not continue as Barca coach ... as a Barca fan, I think the club needs a change of dynamic."
Since Xavi announced his intention to leave at the end of the season there had been a lack of experienced coaches linked with the job.
Only former defender Rafael Marquez, who currently manages the Barcelona B team, had been regarded as a serious contender.
Ex-Germany coach Hansi Flick and Brighton's Roberto De Zerbi were also linked.
Despite Barcelona's indifferent season, there are signs of hope for the club's future well-being with the emergence of 16-year-old Lamine Yamal, Pau Cubarsi, 17, and 20-year-old Fermin Lopez.
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