The contract is worth $60 million over three years and includes $40 million guaranteed and $28 million in Year 1, a source told ESPN's Adam Schefter.
Williams made a base salary of $15.68 million last season after the Chargers picked up his fifth-year option.
He is coming off the best season of his five-year career, setting career highs with 76 receptions and 1,146 yards while adding nine touchdown receptions, one short of his previous career best. He had 27 more catches and 145 more yards than his previous highs entering the 2021 season.
The 27-year-old had six tying or go-ahead touchdown receptions this past season, the most in the league since Sterling Sharpe in 1989.
Chargers quarterback Justin Herbert looked to the 6-foot-4 playmaker in the clutch, and Williams delivered. He created space on a 53-yard touchdown catch with 2 minutes, 3 seconds remaining in a 41-37 victory against the Pittsburgh Steelers in Week 11. Williams also had a game-tying, 12-yard TD catch on the final play of regulation against the Las Vegas Raiders in Week 18.
And rather than strictly relying on his size and jumping ability on contested throws, the Chargers entrusted Williams to "flip the script," in his own words, and got the ball to him on a lot of quick, short routes.
Williams has missed only four games since his 2017 rookie season, which was largely derailed because of injury after he was the No. 7 pick in the NFL draft. In his five seasons with the Chargers, Williams has 227 catches for 3,662 yards -- an average of 16.1 yards per catch -- and 27 total touchdowns.
Information from ESPN's Shelley Smith was used in this report.