ESPN The Magazine's Ric Bucher reported Wednesday night the deal is for five years and in excess of $25 million.
Dunleavy, in the final year of a four-year contract, led the Clippers to a 47-35 record last season -- the second-best in franchise history. The team went on to beat Denver for its first playoff series victory in 30 years before losing to Phoenix in the second round.
"Mike Dunleavy has proven that he is an outstanding basketball coach," Clippers general manager Elgin Baylor said in a statement issued Wednesday night. "Mike has already experienced a lot of success with the Clippers, and there is no doubt in my mind that he is the right person to continue to lead this team in the future."
The agreement was announced before the Clippers (10-10) faced the Utah Jazz.
Dunleavy ranks second on the Clippers' all-time list for coaching victories with 122, and he entered the season in ninth place among
active NBA coaches. He earned his 500th career win last March.
The Clippers improved their record in each of Dunleavy's first three seasons. They entered Wednesday night's game with a 122-144 record under the former South Carolina star.
"It's a good move for the organization," Clippers forward James Singleton said. "He's been involved in basketball for 30 years and has taken this team to a whole new level."
Information from The Associated Press was used in this report.