Once the deal is finalized, the right-hander will be guaranteed $52 million from a three-year extension that will run from 2010-12. Should the team exercise a $22 million option for 2013, the deal will be worth $70 million.
Including 2008-09, for which Peavy already is under contract, he could make $87.5 million during the next six seasons.
The extension is contingent on the 26-year-old Peavy passing a physical. The two sides are continuing to work on other details, including the scope of no-trade provisions.
"I think it sends a great message to everybody in San Diego, and I think it's a great indicator of Jake's willingness to stay, of the Padres' commitment to keeping our core players," manager Bud Black said at the winter meetings. "He's obviously one of the best pitchers in the game, and to have him on board for it looks to be another six years, another six seasons, it's great. And he's still 27 years old, so he's got a lot of great pitching left ahead of him."
The deal probably won't be finished until club officials and agent Barry Axelrod return from the winter meetings in Nashville.
"We have the advantage of all living in the same city," Axelrod said by phone on Tuesday. "We don't have to focus on it in Nashville."
A person with knowledge of the deal, speaking on condition of anonymity because the deal hasn't been finalized, said Peavy will earn $15 million in 2010, $16 million in 2011 and $17 million in 2012. If the club declines the $22 million option, Peavy will get a $4 million buyout.
The guaranteed money in Peavy's extension will average $17.3 million a season. By comparison, Carlos Zambrano of the Chicago Cubs averages $18.3 million and Barry Zito of the San Francisco Giants averages $18 million.
Peavy, a 15th-round pick in the June 1999 draft, will make $6.5 million in 2008. Because he won the Cy Young Award, the price of the club's 2009 option increased by $3 million to $11 million.
The Padres have long given the so-called San Diego Discount. Players know they can get more as free agents elsewhere, but San Diego's sunny climate makes it a great place to play -- even if the Padres haven't won a postseason series since 1998.
When finalized, Peavy's pact will surpass the biggest total deal in franchise history, the $34 million, four-year contract slugger Phil Nevin agreed to in November 2001. Like Peavy, Nevin was represented by Axelrod.
Right fielder Brian Giles is heading into the final year of a deal that averages $10 million. He agreed in December 2005 to a $30 million, three-year deal that includes a $9 million club option for 2009, or a $3 million buyout.
Peavy, the unanimous Cy Young pick, led the NL in wins, ERA and strikeouts -- pitching's version of a Triple Crown. He went 19-6 while topping the majors in ERA (2.54) and strikeouts (240) for the Padres, who came within one win of their third consecutive playoff berth. He joined Roger Clemens as the only starting pitchers to win a Cy Young Award without tossing a complete game.
Peavy is 76-51 with a 3.31 ERA in his career. He led the majors with a 2.27 ERA in 2004 and topped the NL with 216 strikeouts in 2005.
San Diego also has a one-year agreement with free-agent pitcher Randy Wolf that needs to be finalized.
"He's coming off a minor arthroscopic procedure of his labrum," Black said. "Dr. (Lewis) Yocum had to do a few things, shave a little bone, take care of some fringe on the labrum, and Randy is up and throwing. He's up on the mound. He's very confident how he's throwing, actually to the point where I think that he feels so good about his throwing program, he's going to back off for a little bit."