The versatile 28-year-old, who former Barca coach Pep Guardiola converted into a highly effective centre-back from a midfielder after he joined from Liverpool in 2010, will sign his new deal in the coming weeks.
"Mascherano has become a key player for us," team-mate Lionel told Barca's website.
"Since Guardiola played him in central defence I don't think he has had a bad game," the World Player of the Year added.
Known in Spanish as "El Jefecito" (The Little Boss), Mascherano has played 97 matches for Barcelona, helping them win six trophies-- the Champions League, La Liga, the Copa del Rey, the Spanish and European Super Cups and the Club World Cup.
Mascherano joined Barca for a fee of about 20 million euros according to media reports and the Catalan club said his new contract includes a buyout clause of 100 million euros, up from 90 million.