The announcement came just hours after Saracens were informed they had failed to land their number one target.

Williams was the top contender to replace Francois Pienaar at Vicarage Road, but club chief executive Peter Deakin must now reassess his short-list of candidates. In the meantime first-team coaching duties remain in the hands of Tim Wright, Tim Horan, Kyran Bracken and Richard Hill.

‘‘In spite of offers to coach elsewhere, I am delighted to pledge my future to the Irish Rugby Football Union and Leinster for a further three years,’’ said Williams.

‘‘I now look forward to building upon my work with the Leinster squad.

‘‘We have a tremendous squad of young players in Leinster, and with my management team I am very optimistic about the future for Leinster in the Celtic League and Heineken Cup.’’

With Williams at the helm, Leinster dominated this season’s inaugural Celtic League competition beating provincial rivals Munster in the final - while their European scalps included Toulouse, Newcastle and Newport, before Heineken Cup holders Leicester knocked them out at the last-eight stage.

During a long unbeaten run before Christmas, Leinster played some of the brightest attacking rugby anywhere in Europe - spearheaded by internationals Brian O’Driscoll, Denis Hickie and Shane Horgan.

Saracens, just five points above Premiership bottom club Harlequins, had hoped Williams would give them the green light following talks between both parties in London this week.

‘‘We are disappointed that Matt won’t be coming to Saracens but we understand his reasons,’’ said Deakin.

Saracens have been in the coaching market since Pienaar, South Africa’s 1995 World Cup-winning captain, quit earlier this season.

His departure came after a dismal run when Saracens crashed out of the European Shield and Powergen Cup competitions, while also slipping down the Premiership pecking order.

Although Saracens moved up to seventh place with victory over Bath last time out, they are still within sight of all the teams below them.

They also face a tough Premiership run-in - with four of their last six games away from home at Gloucester, Sale, Northampton and Newcastle.