The controversial decision to replace Christoph Marthaler as artistic director of the Zurich Playhouse has been reversed.
The chairman of the theatre board, Peter Nobel, said Marthaler would remain in his post for at least another season.
Nobel told a news conference on Monday that funding for another season had been secured, but said Marthaler would have to make further savings.
He also said he and three other members of the theatre board would be standing down.
Marthaler, who is widely respected internationally, was appointed in September 2000 to build on the Playhouse's world-class status and has served three seasons as theatre director.
But the theatre board announced in August he would be sacked at the end of the current season, citing poor audience figures. At the same time the theatre warned of potential bankruptcy after audience figures dropped from 170,000 to 120,000 annually, while Marthaler was in charge.
It said the Playhouse was short of SFr4 million for the 2003-2004 season.
The surprise decision to remove Marthaler caused consternation in the theatre world and prompted around 1,000 of his supporters to stage a demonstration in Zurich.
The decision was all the more surprising because the government had shortly before agreed to increase its annual subsidies to the Playhouse by almost SFr4 million to SFr34 million.
Some members of the theatre world questioned whether Marthaler's dismissal had anything to do with the state of finances, claiming that he had fallen foul of the political elite, which controlled the purse strings.
Marthaler was known as someone who pursued his own agenda and who favoured a provocative artistic programme.
Announcing the reversal of its earlier decision, the board said Marthaler would have to make savings of SFr2 million. The Zurich cantonal authorities would guarantee the remaining SFr2 million shortfall, it said.
The committee set up to fight for Marthaler's reinstatement welcomed the decision and said it would please theatre lovers in Zurich and beyond.
swissinfo with agencies
The board of management of the Zurich Playhouse has reversed a controversial decision to remove theatre director Christoph Marthaler.
It said he could stay on for another season, but would have to make cost-savings of SFr2 million.
Marthaler's supporters had condemned the decision to remove him after just three seasons, as politically motivated.