The Spaniard's existing deal still had two years to run but he has agreed terms for an additional 12 months, the PA news agency understands.
Villa are also keen to sit down with the 52-year-old in the summer and discuss a new longer-term contract.
Emery has done an impressive job at Villa Park, guiding them from a relegation fight when taking over from Steven Gerrard in November 2022 to the brink of Champions League qualification this season.
They are also in the semi-final of the Europa Conference League, where they play Olympiacos, and are the favourites to win the tournament which would represent a first European trophy since 1982.
Due to his impressive work at Villa Park, he was recently linked with the vacant Bayern Munich managerial position, while a number of other top European clubs will be looking for managers this summer and might have targeted the former Sevilla, Arsenal and Paris St Germain boss.
After Emery guided them to a seventh-placed finish last season, Villa have kicked on this term and are in pole position to finish fourth and qualify for the Champions League for the first time.
They are sixth points ahead of fifth-placed Tottenham, who have two games in hand, and are managing their tough Thursday-Sunday schedule well.
Villa play Chelsea on Saturday night, where they could move nine points clear of Spurs, who play Arsenal on Sunday.
10°C