The Spain international, who has been linked with a move to the Premier League this summer, will put pen to paper on his new deal on Friday.
A statement from Barcelona read: “FC Barcelona have reached agreement with Sergio Busquets to extend his contract with the club until June 30th 2019, with an option for a further year after that.
“The contract will be signed on Friday lunchtime in the club offices at the Camp Nou.”
According to reports in Spain, the new deal will see Busquets become one of the highest paid players in the squad and will allow Barca to increase the player’s buy-out clause to 150million euros.
A youth product of Barca, the holding midfielder has made made 313 appearances for the Blaugrana since breaking into the first team in 2008.
The 26-year-old has helped the club win 16 trophies, including two Champions League titles.
Busquets was a member of Spain’s World Cup winning side in 2010 and also lifted the European Championship title two years later.
He has started in 22 league games for Barca this season.
Barca are alive in three competitions and are second in La Liga.
The Catalan giants have also reached the semi-finals of the Copa del Rey and host Manchester City next month in the Champions League last 16 holding a 2-1 advantage from the first leg.