The No 10’s present agreement is set to expire at the end of the season, but a new deal until 2016 has been drawn up.
Totti, who will be 37 later this month, will see his present €4.5million (£3.7) a season salary reduced to €3.2m (£3.2m) per season.
The extension will be made official later this month once Roma President James Pallotta arrives from America.
The two parties have also come to an agreement with regards to the forward’s role at the club when he does finally hang up his boots.
The Roman will be handed a five-year contract to act as the club’s ambassador, a position which will see him net €600,000 (£500,000) a year.
Totti, a World Cup winner with Italy, has just begun his 22nd Serie A season with the Giallorossi. He has scored more than 200 goals in over 500 League appearances for his beloved Magica.
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