The 67-year-old Italian had been linked with the vacant Tottenham Hotspur job following the departure of Andre Villas-Boas earlier this month.
However, he is now set to remain in charge of Russia after guiding them to qualification for next year's World Cup in Brazil.
Russian Sports Minister Vitaly Mutko said: "The last touches to Capello's contract have been made and now the Russian Football Union should set a date for the signing and I think that this should happen after the New Year holidays.
"Nothing can stop it, all the questions have been agreed."
Former AC Milan, Real Madrid, Roma and Juventus boss Capello took charge of Russia following the resignation of Dutchman Dick Advocaat, who quit after Russia's group-stage exit at Euro 2012.