Williams hopes to go into coaching when he finishes playing

The wing will stay at Liberty Stadium until the end of the 2010-11 season and hopes to go into coaching when his playing days end.

Williams, 31, said: "I can't imagine playing anywhere else. It's where I feel at home and I want to stay here for the rest of my career.

"After that I'd hope to stay involved in the region in a coaching role."

However, Williams hopes to continue playing beyond the end of the contract, saying: "I think I've got more than three years in me yet."

Ospreys coach Lyn Jones said: "As with the re-signing of Lee Byrne, this is a massive statement of intent by the region which can only be good news for Welsh rugby.

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"This is excellent news for everyone involved with the Ospreys, particularly the supporters who enjoy nothing more than the sight of Shane in full flight with ball in hand.

"His career has been quite a journey since myself and Mike Cuddy first signed him for Neath as a scrum-half in 1998.

"We've been with him through all the highs and lows and shared his many successes along with the thousands of true rugby supporters who appreciate the unique talents he brings to any team he is a part of."

Williams signed for Neath from Amman United as a scrum-half, but switched to the wing and has gone on score 39 tries in 54 Wales appearances, one short of Gareth Thomas' all-time record of 40, and toured New Zealand with the British & Irish Lions in 2005.

He has also made 78 Ospreys appearances and is the region's leading try-scorer with 35, an impressive 15 ahead of second-placed Gavin Henson.