The Reds planned to discuss the deal Thursday. Bailey declined to comment on the agreement after a workout Wednesday.
The right-hander, who was 11-12 with a 3.49 ERA in 2013, was the final major league player left in arbitration this year, with a hearing scheduled for Thursday. Bailey asked for $11.6 million, and the Reds offered $8.7 million, their biggest gap among their players in arbitration. Bailey avoided arbitration last season with a one-year, $5.35 million deal.
The Cleveland Plain Dealer reported Sunday night that the sides were nearing agreement on a six-year, $100 million contract.
The deal includes a $25 million mutual option for 2020 with a $5 million buyout and would help the Cincinnati Reds with their cash flow by deferring some of the salary for short periods.
Bailey would get salaries of $9 million this year, $10 million in 2015, $18 million in 2016, $19 million in 2017, $21 million in 2018 and $23 million in 2019. In an unusual twist, much of the annual salary would be deferred until the November after each season.
Bailey would be paid in-season amounts of $3 million this year, $4 million next year, $11 million in 2016, $12 million in 2017, $14 million in 2018 and $15 million in 2019.
If he were to be traded, his new team would have to pay all of the salary amounts during the season. Also, the $5 million buyout would be paid when either side decides not to exercise the option rather than having it deferred until November 2020.
The 27-year-old Bailey is 49-45 in his career with a 4.25 ERA. He set highs in innings pitched (209) and strikeouts (199) last season, and threw his second no-hitter in two seasons. Bailey is the third pitcher in Reds history to throw two no-hitters, joining Johnny Vander Meer and Jim Maloney.
The hard-throwing Texan went a career-best 13-10 with a 3.68 ERA in 2012, completing his breakthrough season by throwing a no-hitter in Pittsburgh on Sept. 28, a 1-0 victory. He threw the 16th no-hitter in franchise history last June 2, a 3-0 win over San Francisco at Great American Ball Park.
With Johnny Cueto, Mat Latos, Mike Leake, left-hander Tony Cingrani and Bailey, the Reds have a rotation that can be kept together for several years. Bronson Arroyo left as a free agent after last season, and Cingrani moves into his spot.
Cincinnati's rotation finished third in the National League last season with a 3.43 ERA, its best mark since 1974. Overall, the Reds' pitching finished fourth in the NL with a 3.38 ERA and led the league with 1,296 strikeouts, a club record.
"You look at that rotation right there, I wouldn't mind any of those guys being here long term, would you?" manager Bryan Price said this week. "Five guys between 24 and 28 years old. I'm not scratching my head wondering about any of those guys, if they're going to be good long term.
"That's a great group right there. If we had Homer long term, I'd be really excited about that."
The Associated Press contributed to this report.