The 49-year-old will sign the extension in January and DFB president Theo Zwanziger confirmed to German sports agency SID that a deal has already been agreed upon.
With his side set to face Australia, Ghana and Serbia in Group D at next June's World Cup in South Africa, the extension means Löw will be in charge of Germany for Euro 2012 which will be held in the Ukraine and Poland.
"We have come to an agreement to extend this successful collaboration until after the World Cup," said Zwanziger, adding that Löw had met with him to discuss the extension on Tuesday at the DFB's headquarters in Frankfurt.
"We had a good discussion," said Zwanziger. "Both sides were in principle ready to continue to work together because there is mutual trust between us."
Zwanziger said both assistant coach Hansi Flick and goalkeeping coach Andreas Köpke will also have their contracts extended and Löw will keep his current coaching team together.
The current set-up guided Germany to the final of Euro 2008 when they lost 1-0 to Spain in Vienna. His side has also finished at the top of their qualifying group to book their place at next year's World Cup.
Löw replaced Jürgen Klinsmannn as head coach after the 2006 World Cup where Germany finished third.