Gruden had two years left on the five-year contract he signed when he was hired in January 2014. The extension will take him through the 2020 season.
According to Rapoport, the extension was struck late Saturday at Prime 47 steakhouse in Indianapolis, where the NFL Scouting Combine is taking place. Saturday was also Gruden's 50th birthday.
In three seasons with Washington, Gruden has a regular-season record of 21-26-1. He guided the Redskins to the NFC East title in '15, but lost to Green Bay in the wild-card round of the playoffs.
Gruden is the first head coach to receive a contract extension under Redskins owner Dan Snyder, who purchased the team in 1999.