The terms of the new agreement, which will run until 2013, have not been revealed but Speedo claimed that it was the biggest sponsorship deal in its 80-year history.

Craig Brommers, Speedo's senior Vice-President of marketing, said: "We have a shared vision to grow the sport of swimming.

"In the worst economy of our generation, the Speedo performance category is actually stronger than ever and that's attributed to the Michael Phelps factor."

Some analysts had questioned whether Phelps' marketability would suffer after Britain's News of the World newspaper in February ran a picture of Phelps with a glass pipe allegedly smoking cannabis, saying it was taken at a student party at the University of South Carolina last November.

Phelps apologised, calling his behavior "regrettable" and "inappropriate," and was suspended for three months by USA Swimming.

Phelps said: "Speedo`s support both in and out of the pool has helped me grow into the
swimmer I am today.

"I am grateful for the brand`s commitment to help realise our shared vision to grow the sport of swimming both in the US and around the world."

Phelps won a record eight Olympic gold medals in Beijing last year, taking his career total to 14, making him the most successful athlete in the history of the Games.

Speedo, which has sponsored Phelps since 2001, last year awarded him a $1 million bonus for breaking Mark Spitz's record of seven gold medals at the Munich Games in 1972.

He used the money to set-up his own charity foundation.

Under the new deal, Speedo has promised it will donate $10,000 to Phelps' foundation for every world record he sets and he has agreed to match each donation.

Joe Gromerk, the chief executive of Warnaco Group Inc, the North American licensee for the Speedo brand, said: "Michael has transformed the sport of swimming, with more fan interest and participation than ever before."

Phelps won five gold medals at the World Championships in Rome this year, despite having what he claimed was a low-key year after Beijing.
 

David Robinson, the President of Speedo International, said: "Michael continues to
inspire the entire world of swimming and is a fabulous ambassador for the Speedo
brand across the 175 countries that we operate within."
 
Phelps' other sponsors include high-end watch maker Omega, video-game publisher 505 Games, Hilton Hotels Corp, PureSport, Subway, Visa Inc, automaker Mazda Motor Corp in China and H2O Audio.

Phelps will alsoremain on the athlete advisory group to the Speedo Aqualab, which develops new technologies in swimwear and accessories.