A statement from the London club on Tuesday confirmed that Allardyce, whose future has been the subject of much speculation, will lead West Ham into the 2014-15 campaign.
However, the 59-year-old has been left in no doubt that "more entertainment" is expected next term, following complaints from supporters over his style of play, together with a top-10 finish.
West Ham finished 13th in the Premier League this season, having appeared in serious danger of relegation prior to a run of four successive wins in February.
Those results earned Allardyce a manager of the month award, but a subsequent dip in form saw him come in for further criticism in the closing weeks of the season, with many fans expressing their unhappiness at matches.
West Ham's statement on Allardyce's future acknowledged the need to win over disgruntled fans.
It read: "West Ham United can confirm that manager Sam Allardyce will lead the club into the 2014/15 Barclays Premier League season after constructive talks with the club's board.
"The board and Allardyce have held lengthy and detailed discussions on the club's direction, values and philosophy and a positive way forward for next season has been agreed.
"After listening to feedback from supporters, the board have insisted on improvements to the set-up of the playing and backroom staff to ensure the team provides more entertainment next season.
"The manager has agreed to recruit a new attacking coach to complement the existing coaching set-up as well as an overhaul of the club's scouting and recruitment operation that will see the board have a greater involvement in the players who are signed, as the board will once again be investing considerable funds into the club this summer.
"The club have made clear that they want to see progression on the pitch and at least a top-ten finish as a result."
David Sullivan and David Gold, West Ham's joint-chairmen, added: "We have a very clear vision of how we want West Ham United to operate under our joint ownership. Although not everybody understands the West Ham Way, we do and we respect it as we have been supporters all our lives. We believe this is about a philosophy that is not just about the style of play, but the whole ethos that surrounds the club.
"Sam was asked to give us a detailed presentation on his vision for next season and during this he assured us that he can deliver that ethos to West Ham United and we have agreed to support him with the resources that he needs.
"We have mapped out a way forward with him that will ensure our much-deserving fans have more to cheer about next season.
"We should also stress, though, that while improvements do need to be made, Sam deserves credit for the job he has done thus far after securing promotion in his first year and two respectable Premier League finishes in the two years thereafter."
Allardyce said: "I look forward to taking the club forward and improving the squad for next season to try and achieve the plans we have set out in our very productive meeting last week."
