The Ravens announced the extension but did not disclose the length of the contract or its financial terms.
Peters has a made a huge impact during the best season in franchise history since being acquired from the Los Angeles Rams in October. He would've been the top free agent after the season for the Ravens (13-2), who have the best record in the NFL and have clinched the top seed in the AFC playoffs.
The extension includes $32 million guaranteed, which is 76% of total contract, a source told Schefter. It will pay Peters $20.5 million in the first year and allow him to hit the free-agent market when he's 29.
Baltimore acquired Peters from the Rams on Oct. 15 in exchange for a 2020 fifth-round pick and linebacker Kenny Young.
The best ball hawk for the Ravens since Ed Reed, Peters has been a key figure in Baltimore's defensive resurgence by returning two interceptions for touchdowns and breaking up a last-minute pass in Buffalo to clinch a playoff berth.
With Peters, who was selected to his third Pro Bowl this season, the Ravens have allowed the fewest points and second-fewest yards in the league.
Since entering the NFL in 2015, Peters leads the league with 27 interceptions and seven defensive touchdowns. Baltimore had targeted Peters in that draft before he was taken by Kansas City at No. 18 overall, eight spots before the Ravens.
By keeping Peters and Marlon Humphrey together, the Ravens have one of the best young cornerback tandems in the NFL. Humphrey could be in line for an extension this offseason.
This continues a trend by first-year general manager Eric DeCosta, who has said he wanted to make a stronger effort to sign players before they hit free agency. Peters is the seventh Ravens player to an extension since last offseason, joining cornerback Tavon Young, kicker Justin Tucker, guard Marshal Yanda, wide receiver Willie Snead, linebacker L.J. Fort and fullback-defensive tackle Patrick Ricard.