"Jonas' contributions continue to improve with each season, and we view him as a significant part of what we are building in Toronto," Raptors president and general manager Masai Ujiri said in a statement.
Sources told ESPN.com's Marc Stein the deal is for four years and $64 million and includes a player option entering the fourth year that would allow Valanciunas to be a free agent in the summer of 2019.
The new deal will kick in during the 2016-17 season.
ESPN.com reported Monday that Valanciunas and the Raptors were closing in on a four-year deal worth at least $60 million.
Valanciunas, 23, has averaged 10.9 points, 8.0 rebounds and 1.1 blocks in three seasons with the Raptors.
In an era of exploding salaries, Valanciunas' $16 million average annual salary in the new contract falls right in line, and even a little below, what the most sought-after big men on the market are getting.
Enes Kanter signed a $70 million maximum contract with Oklahoma City; Omer Asik got a five-year, $60 million deal from New Orleans; and the Knicks gave Robin Lopez a four-year, $54 million deal. The Raptors signed DeMarre Carroll, Cory Joseph, Bismack Biyombo and Luis Scola this summer to try to bolster a roster that has been competitive in the regular season but has flamed out in the playoffs.
The Raptors have won consecutive Atlantic Division titles but were bounced in the first round both years and have not advanced to the conference semifinals since 2001.
Information from The Associated Press was used in this report.