The 25-year-old Spain international has spent his entire senior career at Barca and has made 238 appearances to date for the Catalan club.
Busquets will put pen to paper on the new deal on Tuesday, according to a statement on the club's official website.
"Sergio Busquets will sign a contract renewal this Tuesday lunchtime which will keep him at the club until June 30, 2018, with the option of a further year," read the statement.
"His buy-out clause is set at 150 million euros.
"The club and the player reached agreement on the new deal on July 16 - the day Busquets celebrated his 25th birthday."
Busquets has been a key figure in the Barca midfield for the last five years, helping the team win four La Liga titles, two Copa del Rey trophies and two Champions Leagues during that time.