Varejao, 32, is in the final year of his current deal.
He has spent his entire 10-year career with the Cavs, and is one of superstar LeBron James’ closest friends in the L.
The Cavaliers and Varejao, sources said, have been eager to finalize terms on a new pact before the start of the new season.
Varejao, 32, was in the final year of a six-year, $49 million pact and is earning $9.7 million this season. The Brazilian started for the Cavaliers in Thursday’s opener against the Knicks ahead of the younger Tristan Thompson, who is also hoping to secure a contract extension before Friday’s deadline for first-round picks from the 2011 draft to receive extensions from the teams that drafted them.
Varejao appeared in 65 games last season, averaging 8.4 points and 9.7 rebounds in 27.7 minutes per game.