Chile international Vargas has fallen down the pecking order at Napoli this season and has been linked with a number of clubs.
Reports had suggested that he could be heading to Arsenal on loan, but it appears Sao Paulo are now in pole position to clinch his signature.
"We'll define his signing this week," Sao Paulo president Juvenal Juvencio told Radio Bandeirantes.
"Values and intentions have been agreed. Now we have to wait, we will have him for a year and a half.
"We believe he will be an important player for us."