Allen was scheduled to meet Wednesday with owner Mark Davis and general manager Reggie McKenzie to map out plans for how to rebuild the struggling franchise after consecutive four-win seasons to begin his tenure.
Allen said after the season that he had been given an indication that he would be back for a third season but he still needed to talk with Davis. That meeting happened Tuesday night and now the Raiders can start planning for 2014.
Oakland has gone 11 straight seasons without a playoff berth or winning record and has an NFL-worst 123 losses since the start of 2003.
The team has had seven coaches in that span with Allen becoming the first to get the chance to coach three full seasons as Mark Davis is showing more patience than his demanding father, Al, did before his death in 2011.
Allen is the eighth coach since the 1970 merger to be brought back for a third season after losing at least 24 games their first two years.
The results of the seven previous are mixed.
Bill Walsh won three Super Bowl titles in San Francisco and Jimmy Johnson won two in Dallas after being retained following two tough seasons.
John McKay stayed with the expansion Tampa Bay Buccaneers and led them to the NFC championship in his fourth year and two more playoff appearances. Jim Schwartz led Detroit to the playoffs in his third season.
But not all the coaches were successful. Tom Flores got fired in Seattle and Steve Spagnuolo got let go in St. Louis after posting a third straight losing season. David Shula had two more losing seasons in Cincinnati before being fired midway through his fifth year with the Bengals.
The only one of those seven coaches to be brought back despite showing no increase in win total in the second year was Shula.