The news ends speculation that the England left-back would leave Stamford Bridge on a free transfer when his contract expired at the end of the season.
He had been linked with moves to Real Madrid and Paris St Germain but has decided to stay at the club he joined in 2006, with the paperwork expected to completed before Tuesday.
The defender, who has 99 England caps, was part of the team that beat Bayern Munich to win last year's Champions League final, and has also won one Premier League title, four FA Cups and a League Cup with Chelsea.
His team-mate Frank Lampard is also out of contract at the end of this campaign but looks set to depart the west London club.
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