AC Milan fans have received good news ahead of Sunday's game against Inter Milan with coach Massimiliano Allegri having signed a two-year contract extension with the club.

The 44-year-old, who guided the Rossoneri last season to the scudetto in his first season in charge, has put pen to paper on a deal which will see him remain at Milan until June 2014.

Allegri's extension came just 24 hours after Brazilian striker Alexandre Pato announced his decision to remain at the club.

Pato, who has scored 51 goals in 111 league appearances for the Rossoneri since making his debut in January 2008, turned down a move to Paris Saint-Germain on Thursday.

"Milan is my home," Pato said. "I want to contribute to writing the history of this club."

The South American's decision has gone down well with his team-mates.

"I'm very happy that Pato is staying," AC Milan midfielder Kevin Prince Boateng said.

"Although I would have respected whatever decision he would have taken."

Boateng will play behind attacking pair Zlatan Ibrahimovic and Robinho, with Pato set to start on the bench.

"I love the atmosphere of the derby," Boateng said.

"We are stronger than Inter and we want to end their hopes of fighting for the scudetto."

The Rossoneri go into the encounter on the back a 2-0 triumph at Atalanta that extended their unbeaten run in the league to 12 games.

The result moved Milan to the top of the standings, level on 37 points with Juventus.

Inter are fifth and

trail eight points behind Milan.

Last weekend's 5-0 triumph over Parma was Inter's seventh win in the last eight league games.

Moreover, Claudio Ranieri's side have conceded just one goal in its last five league games.

The victory over Parma moved Inter into fifth place, eight points behind leaders AC Milan after 17 games.

"I hope that my team plays a good game because that is important," Inter president Massimo Moratti said.

"A win would allow us to get back in contention (for the scudetto)."

Inter will be bolstered by the return of Dutch winger Wesley Sneijder and Italian midfielder Thiago Motta.

Sneijder has been out of action for two months with a muscular problem while Motta was sidelined with a hamstring injury.

Milan are without midfielders Alberto Aquilani and Gennaro Gattuso as well as striker Antonio Cassano, all sidelined through injury and illness.