His current contract runs out in July of next year. City officials did not specify for how long Barenboim would renew his engagement, saying this would be made public at a signing ceremony on Wednesday.
In 2000, Barenboim, now aged 68, was made a life member of the Berlin State Opera.
Known for his campaigns for peace between Israel and the Palestinians, Barenboim conducted an orchestra of top European musicians at a special concert in Gaza in May.
Barenboim received a British knighthood last week in a ceremony at the British embassy in Berlin for his work toward reconciliation in the Middle East through music.
Despite being an honorary Knight Commander of the most excellent Order of the British Empire (KBE) he is not entitled to use a "Sir" title -- a privilege reserved for Britons.