Coyle, who guided the Clarets into the Premier League through the play-offs last month, had been linked with the Celtic vacancy following Gordon Strachan's recent departure but made his commitment to Burnley clear from the start.
And the Scot has made that commitment official by extending his current deal by a further two years.
Clarets operational director Brendan Flood expects Coyle to continue moulding a team committed to playing "attractive football".
"We are delighted to secure Owen's commitment to Burnley Football Club for a four year period until the end of 2012/13 season," he told the club's website.
"Owen is a young manager with a great future, who will continue to revive the traditions of Burnley FC to develop young British talent and to play attractive football.
"As this year represents the club's 50th anniversary since we won the First Division, we are delighted that Owen will lead the club and its fans through one of the most exciting seasons in our
"The community has recognised Owen's qualities and we are sure everyone will welcome this news, so that we can now concentrate on our plans for a very successful season."