Sunderland AFC Chairman Niall Quinn said: "We are very pleased that Peter Walker has re-considered his decision to move to pastures new and will not now be leaving the club in the summer.
"The Board felt very strongly that it was in the best interests of the club for Peter to reconsider his position and stay with us.
"We have already made much progress on and off the pitch and these are exciting and challenging times. But it is essential that we continue to drive the business forward and Peter is ideally qualified to do this."