NEW YORK -- Despite his dismal record as coach of the New York Knicks, Don Chaney will be back next season.

The last-place Knicks announced Tuesday that they have extended the contract of Chaney, who has an 11-27 record since taking over in November following the unexpected resignation of Jeff Van Gundy.

The decision came as a major surprise, as it was widely assumed that Chaney was a lame duck who would be dismissed at the end of the season. The team has struggled to such a degree since Van Gundy's departure that Chaney has the worst winning percentage (29 percent) of any coach in franchise history.

"This is about looking forward in the transition process," Knicks president Scott Layden said. "It ends all speculation and removes that distraction."

Layden and Madison Square Garden executive Steve Mills informed the team of the move before their morning shootaround. Chaney said his extension was for one season.

Chaney met with owner James Dolan of Cablevision following the Knicks' loss to San Antonio on Sunday, their seventh defeat in eight games. And although Dolan was stern-faced as he walked into Chaney's office, the purpose of his visit was to inform Chaney of the decision that Layden had made a few days earlier -- that he would be retained as head coach and will have input as the team moves ahead.

Admitting their disappointment with the current season, Layden repeatedly used the phrase "transitional" in describing the state of the team, while Dolan uttered the magic word "rebuild."

Layden said the team would look to improve through trades, free agency and the draft.

"While everyone would like us to reveal the plan or to put our plan out on the table, I don't think it's wise to discuss those strategies publicly," Layden said.

New York is 15 games under .500, with a worse record (21-36) than every team in the Eastern Conference, except Chicago and Cleveland.

Barring a complete turnaround, the Knicks will miss the playoffs for the first time in 15 years. But management believes Chaney is the right man to lead the team out of its funk and back to respectability.

"We were all a little surprised," Houston said. "I had an idea just because I knew that Jim Dolan and Knicks management liked Don as a person, liked his character and how he carries himself.

"It's hard to judge what he's done based upon the situation he was put in," Houston said.

At shootaround, Chaney addressed the team and thanked the players for sticking together during a season that has been worse than anyone on the Knicks could have imagined.

Van Gundy resigned unexpectedly when the team had a 10-9 record, and the Knicks have been plummeting since. They have blown double-digit leads in 12 games, stopped playing the kind of intense defense that has been their trademark and have all but admitted they have almost no chance of reaching the postseason.

Injuries have taken a toll, too. Marcus Camby is out for the season with a torn hip muscle after playing a career-low 29 games, and opponents have taken advantage of New York's lack of size and quickness.

Layden has been under criticism for assembling an underachieving team with a league-high payroll of $85.1 million, and Chaney has been targeted for his laid-back style -- especially by those who believe the team needed to be pushed.

"I don't think it's fair to even compare Jeff and Don," Houston said. "Don was thrown into a situation where he took over a team that had all the tendencies and the mindset of someone else. Now he'll get an opportunity to establish his own."

With 25 games left, the Knicks would need to go 20-5 to finish 41-41. But that seems completely unlikely given that the Knicks went 2-10 in February while being booed regularly in their own arena.

Chaney said his lame-duck status was a "huge distraction."

Layden has just returned from a trip to China to scout Yao Ming, the 7-foot-6 center who is expected to be a high lottery pick.

The 54-year-old Chaney was the NBA's Coach of the Year in 1990-91 with the Houston Rockets and is in his 22nd season as an assistant or head coach. In nine seasons with the Clippers, Rockets, Pistons and Knicks, Chaney has a career record of 276-418.

"Let's give the coach the benefit of the doubt," guard Mark Jackson said. "It's been a tough ride for all of us, but he's a quality, quality guy and it's good to see good things happen to good people."