The deal, which is technically for six years but voids to four so as to help Dallas against the salary cap, can be worth up to $164 million, a source said.
Prescott's signing bonus is $66 million, the highest in NFL history, with a record $75 million due in Year 1, Schefter reported. The first three years of the deal average $42 million per year, according to a source.
The Cowboys announced they had agreed to a contract with Prescott but did not disclose terms. The Cowboys will place the franchise tag on Prescott on Tuesday as a procedural matter, a source told Schefter. The Cowboys announced they will hold a news conference Wednesday.
Prescott's salary-cap number for this season will be $22.2 million instead of the $37.7 million that would have come along with the franchise tag, a savings of $15.5 million against this season's cap, Schefter reported.
The process to reach a long-term deal with Prescott covered three offseasons, multiple mega-million offers and hours of negotiations. The Cowboys, all along, said they wanted Prescott to be their franchise quarterback for the present and future, and Prescott said he wanted to remain with the Cowboys.
It just took a lot longer than normal.
Prescott, who will turn 28 in July, is coming off a compound fracture and dislocation of his right ankle suffered in the Week 5 win against the New York Giants in October, but he was predicted to make a full recovery during the offseason.
The road to the deal was complicated by the extensions signed by fellow 2016 draftees Jared Goff and Carson Wentz in 2019, the final year of a collective bargaining agreement, and the unwillingness for either side to bend in what they wanted in terms of the length of the contract. The Cowboys wanted a commitment of five years or more; Prescott's side wanted a four-year deal.
Now that it is complete, the focus turns to improving the roster around Prescott to make sure the Cowboys can contend for a Super Bowl.
The Cowboys have missed the playoffs in three of the past four seasons. Prescott's absence in 2020, however, showed how integral he is to their success. Before getting hurt, he threw for 1,856 yards with nine touchdowns and four interceptions in five games. The Cowboys' offense scuffled along for a few weeks without Prescott, scoring one touchdown in three games after scoring at least 31 points in four of their first five games.
In five seasons, Prescott has a team-record seven 400-yard passing games and 24 rushing touchdowns, the most by a Cowboys quarterback. He is second to Tony Romo in 300-yard passing games with 15. Prescott also has proved to be clutch with 15 game-winning drives.
Prescott, the Cowboys' 2016 fourth-round pick, has posted a 42-27 record with 17,364 passing yards to go along with 106 touchdown passes and 40 interceptions.
With the contract secured, the expectations will be even greater on Prescott to deliver a Super Bowl to an organization that has not made it to the title game in 25 years.
ESPN Stats & Information contributed to this report.