The 33-year-old lost his place to Raphael Varane after struggling at the start of last season under Rafa Benitez, toiling noticeably against the pace and power of Villarreal forward Cedric Bakambu in Real’s 1-0 defeat at El Madrigal in December.
However, Pepe rediscovered his form after Zidane took charge, performing exceptionally to help Real to their eleventh Champions League crown and Portugal to their first ever major trophy at Euro 2016.
Pepe has a good relationship with Zidane, who is believed to support the decision to keep the experienced centre-back.
"We worked well with Benitez, although things didn't go well with him,” Pepe said after beating city rivals Atletico on penalties in the Champions League final, as reported by Goal. “Zidane gave us a different air. He trusts us a lot, he understands the dressing room.”
However, news of Pepe’s extended stay could cast further doubt on Raphael Varane’s future in the Real Madrid defence.
The 23-year-old was dropped to the bench in the second half of the season after enduring an indifferent campaign where his undoubted physical attributes were repeatedly overshadowed by a number of naïve mistakes.
Although the defender admitted he wants to fight for his place at the Bernabeu, new Manchester United manager Jose Mourinho, who brought Varane to Spain from Lens in 2011, is reportedly keen on a reunion at Old Trafford, according to AS.
In 2014, the former Madrid boss told the Sun he believed Varane was “the best young central defender in the world. Already I think he's the best.”
However, his stuttering development, plus the emergence of the likes of Jose Maria Gimenez, Jeison Murillo and current United defender Eric Bailly, have cast doubt on Mourinho’s claims.