The deal will pay him $21 million, according to NFL Network's Ian Rapoport.
Rapoport also reported Penn could stand to receive guaranteed money as part of the contract entering the 2019 campaign based on performance.
Penn and the Raiders have been negotiating a contract for months. The veteran held out deep into training camp while seeking a new deal before returning Aug. 23. He started the Raiders' opening game at left tackle, his 49th straight start for the team.
"We have a great owner, a great GM," Penn told reporters of Mark Davis and Reggie McKenzie when he reported to camp. "I came in here and put my trust in them. I am going to sit here and wait. Control what I can control. And try to get better from what I put out there today."
Penn, 34, has a $5.8 million base salary for the 2017 season.
Pro Football Focus ranked Penn 12th among all tackles in 2016. He was considered top 10 in both run-blocking and pass-blocking efficiency, earning a Pro Bowl berth in the process.
The Raiders are taking a bit of a risk extending an offensive lineman in his mid-30s, but Penn has been an anchor on one of the NFL's best units the last two years. His ability to protect Derek Carr has helped give him time and helped him make huge strides in his development.