Simeone won his second La Liga title this season after his side finished two points clear of rivals Real Madrid at the top of the league, adding to his trophy cabinet with Atletico which has two Europa League medals in it also.
It is reported that Simeone is the highest-paid manager in world football and his new deal could even include an increased salary slip, to reward the Argentine for his long service to the club.
According to Spanish outlet Mundo Deportivo, Atletico and Simeone will agree a deal which ties the manager to the club until June 2024 as both parties are keen to continue with the development of the club.
The La Liga victory this season was the club's first league trophy since the 2013-14 campaign, and the signing of Luis Suarez from Barcelona proved to be an inspired move as the Uruguayan scored 21 La Liga goals this season.
Since Simeone's arrival in 2012, he has gone on to oversee 527 games for the club and he is the second-longest current serving manager in Europe's top five leagues.