The quarterback had been due to become a free agent at the end of the 2012 season, but has led the team to the Super Bowl.
Ravens general manager Ozzie Newsome told reporters: "We'll be able to get that thing done. But one thing we do know, he'll be playing football for us next year. And sometimes that's all you can look forward to is just next year."
CBSSports.com has reported that Flacco will be looking for an annual salary of $20 million (£12.7 million).
Flacco will play in the Super Bowl for the first time in his career this weekend, facing the San Francisco 49ers in New Orleans on Sunday.