The two-year extension keeps Brady under contract through the 2021 season and will pay him $23 million this year, a source told ESPN's Adam Schefter.
That $8 million increase for 2019 will make Brady the sixth-highest-paid QB in the league, a source told Schefter, tying him with Drew Brees of the New Orleans Saints. The Patriots, in turn, get an additional $5.5 million of salary-cap space this year, a source told Schefter.
The deal will be adjusted each year Brady continues playing, according to Schefter.
Brady would have become an unrestricted free agent after the 2019 season. He had been set to make $15 million this year.
News of the extension comes a day after Brady celebrated his 42nd birthday.
On Wednesday, Brady brushed off a question about whether he felt he deserved an extension, but he did speak glowingly of his relationship with the Patriots and their staff.
"I appreciate this team and the opportunity it gave me in 2000," Brady said Wednesday. "I play for a great coach in Coach [Bill] Belichick, and [offensive coordinator] Josh [McDaniels] and I have a great working relationship. I love Mr. [Robert] Kraft and his family. We've had just incredible success. Hopefully we can keep it going."
On Sunday afternoon, Brady tweeted a picture of his draft card from 2000.
I got a chance to hold my draft card a few hours ago. Never forget where you came from. pic.twitter.com/sqBgAbWLCZ— Tom Brady (@TomBrady) August 4, 2019
No quarterback has ever started all 16 regular-season games at age 42, but the extension reinforces the belief that the Patriots expect Brady will be capable of doing so.
Prior to Super Bowl LIII, owner Robert Kraft said he didn't have any reservations about signing Brady to an extension despite his age.
"I would be quite surprised if he didn't continue for quite a while as our quarterback," Kraft said at the time.
The Patriots have Brady, veteran Brian Hoyer and rookie Jarrett Stidham (2019 fourth-round pick) on the quarterback depth chart. Second-year quarterback Danny Etling is transitioning to more of a wide receiver role.
ESPN's Mike Reiss contributed to this report.