The deal is worth $83.25 million with $65 million guaranteed, sources told ESPN senior NFL analyst Chris Mortensen. The $65 million guaranteed would give Rivers the most guaranteed money of any player under a current contract.
Rivers, 33, was in the final year of his deal and scheduled to make $15.75 million in total compensation for the 2015 season. Rivers had indicated that if the two sides hadn't reached a deal before the season started he would be comfortable playing out the remainder of his deal and potentially hitting free agency.
The extension comes as team chairman Dean Spanos has angered many Chargers fans by exploring a move to the Los Angeles area. The Chargers walked away from negotiations for a new stadium in San Diego in mid-June. Mayor Kevin Faulconer has said that if the sides haven't agreed to a term sheet by Sept. 11, there won't be a special election in January.
The Chargers have partnered with the Oakland Raiders on plans for a $1.7 billion stadium in Carson if they can't get new stadiums in their home markets. On Tuesday, Carmen Policy, who is spearheading Carson stadium efforts, told NFL owners that "the Chargers and Raiders are committed to Los Angeles."
Rivers has said he'd be OK playing out the deal, but also said he'd be open to an extension, as long as talks didn't drag out into the season.
"My mentality has been the same since March, which is I'm playing this season right here," Rivers said 10 days ago. "Like I said a few weeks ago, if something happens, it does. But I don't think you should hold your breath for an update any time soon."
Rivers, who joined the Chargers in 2004 as part of a draft-day trade involving Eli Manning, has started every game for the team since taking over for Drew Brees in 2006. He has started 144 consecutive games, the second-longest active streak among quaterbacks behind Manning (167), and is a five-time Pro Bowl player.
Since becoming the full-time starter, he has presided over one of the most successful eras in Chargers history, leading them to five postseason appearances, four division titles and a trip to the AFC Championship Game in 2007. He is also the franchise leader in wins with 88, and his 252 touchdown passes are two shy of tying Dan Fouts' mark for the most in team history.
The one thing lacking in his career is a Super Bowl title. Manning and Pittsburgh's Ben Roethlisberger, the other big-name quarterback taken in the 2004 draft, each have won two Super Bowls. Brees led New Orleans to a Super Bowl title after the 2009 season.
In 2014, Rivers threw for 4,286 yards and 31 touchdowns for a San Diego team that finished 9-7, good for third in the AFC West. Rivers has thrown for 36,655 yards with 252 touchdowns and 122 interceptions in his career.
ESPN.com's Chargers reporter Eric D. Williams and The Associated Press contributed to this report.