The new contract is a four-year, $22 million deal, two league sources told ESPN NFL Insider Adam Schefter.
The 28-year-old Daniels had 38 receptions for 471 yards and two touchdowns last season.
Daniels tore his right anterior cruciate ligament midway through the 2009 season and had surgery that November. He was on schedule to be ready for the start of training camp last year until the spring. He started feeling soreness in the reconstructed knee in April and May, and doctors found a stress fracture in his right kneecap, a potentially career-threatening setback.
Daniels spent the next two months virtually immobilized, wondering when -- or if -- he'd ever play again.
He consulted with several doctors across the country, and some recommended inserting a screw in his knee, a procedure that might've forced him to miss the 2010 season. Dr. James Andrews suggested the more conservative route, letting the injury heal on its own.
After eight weeks, tests showed that the fracture was improving. Daniels resumed his rehab soon after and was ready for Week 1 last season.
Daniels caught 70 passes for 862 yards and two touchdowns in 2008, his best season. He and Andre Johnson formed the most prolific receiver-tight end pairing in the NFL that year, with 185 total receptions and 2,437 yards.
In five NFL seasons, Daniels has 245 receptions for 2,972 yards and 17 touchdowns.
Daniels ranks third in franchise history in yards receiving, behind Johnson (9,164) and Kevin Walter (3,091).
FoxSportsHouston.com reported that Ward's deal was for one year and Cody's deal was for $5.75 million over two years.
Ward played in all 16 games in his first season with the Texans, backing up Arian Foster, who was the NFL's leading rusher in 2010. Ward rushed for 315 yards on 50 carries with four touchdowns.
Information from The Associated Press was used in this report.