The reported £1.25 million deal will allow Moyles to complete ten years hosting the programme, which attracts 7.5 million listeners to the station. According to The Sun, the new contract starts next month and takes the 37-year-old up to New Years 2014.
"Whatever anyone says about Chris Moyles, he does the numbers and the listeners love him," an insider told the paper. "We've been thinking long and hard about the breakfast show going forward - and all roads lead back to Chris. He loves doing the show so it would be daft to take it off him."
Radio 1 bosses are hoping that Moyles will "go out with a bang" after completing his tenth year, while the deal allows them "breathing space" to choose his replacement.
A spokesperson for Radio 1 confirmed the new contract, while station controller Andy Parfitt added: "Chris is a real talent and I believe he has a long future ahead of him here at the BBC."
Moyles previously said that he planned to remain with the broadcaster, despite speculation that Greg James was being lined up to take over his programme.
> Chris Moyles show drives iPlayer radio surge
Watch Chris Moyles and Comedy Dave start Radio 1's longest show ever earlier this year below: