The contract is worth up to $7.75 million, The Indianapolis Star reported Wednesday.
Colts spokesman Craig Kelley confirmed that a deal had been reached, but he did not give financial details. A call to Gil Scott, Vanderjagt's agent, on Wednesday was not immediately returned.
Before the season, Vanderjagt signed for one year at the league minimum of $358,000.
Vanderjagt's new deal would exceed that of Oakland rookie Sebastian Janikowski. The 17th pick in the April draft signed a five-year, $6.05 million contract.
"You always want the biggest and the most if you can get it because that's the way it goes," Vanderjagt said.
"Now I'm the highest-paid kicker in the league and everybody knows it," he added. "You're expected to kick that way, but I do that anyway."
Vanderjagt has converted 75 of 84 field-goal attempts since replacing Cary Blanchard before the 1998 season. That's a club-record 89 percent.
The NFL record, with a minimum of 100 attempts, is held by Jacksonville's Mike Hollis at 82 percent.
Since hitting just 2 of 5 attempts to open the 1999 season, Vanderjagt has made 46-of-48. He's missed only one of his past 41 attempts, a 47-yarder against Oakland.
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