Newcastle coach Brian Smith has resigned from the NRL club with his assistant Rick Stone being handed the job of reviving the Knights' stuttering season.

The Knights have lost their last three games following last month's announcement that Smith had signed a four-year deal to take over the Sydney Roosters next season, and slipped out of the top eight after last week's 40-8 defeat by Parramatta.

The club's board met late on Friday and decided to appoint Stone for the remainder of the season, and for the 2010 and 2011 campaigns.

"We thought it would be an uncomfortable position if we had a coach (Smith) being assisted by the coach who is replacing him (Stone) for next season," Knights CEO Steve Burraston told AAP.

"It was in the best interest of the club to give Rick Stone the reins now."

In a phone conversation with Smith on Friday, Burraston said the veteran coach told him it was Stone's time to shine.

"Brian felt if he stayed around it may have only dragged negative comments and publicity," Burraston said.

"So he felt it was in the best interest of the club and the team for him to step aside he agreed with what the board was thinking ... it was a mutual agreement rather than a sacking."

Smith met with his players before their morning training session at EnergyAustralia Stadium on Saturday and informed them that Stone would be their new coach.

"He's definitely lifted the clubs professionalism," Burraston said of Smith's tenure at the Knights.

Stone has been with the Knights since 2006 where he was Michael Hagan's assistant and becomes the club's first Newcastle born and bred NRL coach.

Stone played for Lakes United in the Newcastle competition prior to joining South Sydney for a three-year stint in 1988.

His credentials will be tested on Monday night when the Knights host Melbourne Storm at EnergyAustralia Stadium and he vowed to take them out of their comfort zone.

"We are in a situation where we've got to win some footy games," Stone said.

"To be fair we've been beaten thoroughly in our last three performances.

"I'm confident after working with the players today well get a reaction."

Burraston also revealed the club had extended Zeb Taia's contract until the end of 2012 but would not be looking to revamp their squad.

"We've got the same roster basically for 2010," Burraston said.

"We don't have any room under the salary cap to buy players and unless someone wanted to move on and we were happy to release them we wouldn't be looking to sign anyone for next year."

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