Chernin, who is the company's president and chief operating officer, has signed a new five-year deal, effective from August 1, replacing his current contract, which expires in November.
Over the past few months Chernin was the centre of speculation linking him to a move to Walt Disney, where he was mentioned as a possible replacement for chief executive Michael Eisner who has been under fire from investors over lacklustre performance.
Murdoch first offered the contract to Chernin earlier in the year although his exact reason for taking so long to sign has not been revealed. According to reports, Murdoch has consistently said that if anything were to happen to him, Chernin would assume control of News Corp in the short term.
However, this does not clash with Murdoch's long term desire to hand over control of the company to his two sons: Lachlan, who is currently deputy chief executive of the company and responsible for News Corp's broadcasting and newspaper interests; and James, who recently took up the role as chief executive of BSkyB.
According to The Financial Times, Chernin is expected to receive the same annual salary as his previous contract, but under the new deal, his bonus is understood to be tied to growth in News Corp's earnings per share. Last year, Chernin received an annual salary of $8.1m (£4.5m) and a bonus of $8m, making him News Corp's highest-paid executive.
Chernin joined News Corporation in 1989 and has been president and chief operating officer since 1996.
He started as president of entertainment of Fox Broadcasting, a position he held for three years. Under his leadership the network launched massive ratings winners such as 'The Simpsons' and 'Beverly Hills 90210'. From 1992 to 1996, he served as chief executive officer of Fox Filmed Entertainment, and oversaw blockbusters such as 'Speed', 'Independence Day' and 'Titanic'.
Murdoch said of the appointment: "[Peter] has done a superb job growing and operating our core entertainment businesses in an increasingly challenging global marketplace. Peter is respected throughout our company and the industry for his intelligence, drive and leadership."
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