The Associated Press, citing an unnamed source, reported Wednesday that Smith's contract will pay him $8 million per season with $16.5 million guaranteed. Smith's new deal can pay him up to $33 million if he reaches all of the incentives in the contract.
"Oh, I'm excited," tight end Vernon Davis told The Associated Press in a text message Tuesday night. "I'm glad. Alex deserves all good things that come his way."
Smith's future in the Bay Area came into question after the 49ers were revealed as a late entrant in the Peyton Manning sweepstakes. Manning signed a 5-year, $96 million deal with the Denver Broncos on Tuesday.
Smith, a free agent, visited with the Miami Dolphins over the weekend after the 49ers met with and worked out Manning and put the former Colts quarterback through a physical exam.
49ers CEO Jed York told CSNBayArea.com on Monday they would like Smith to return, but the decision was up to Smith.
"We have a contract on the table and it's up to him," York told the website. "We'd like for him (Alex Smith) to be here, and we'll see where it goes."
According to the Sacramento Bee, coach Jim Harbaugh met with Smith for an hour Monday in an effort to get the quarterback to return to San Francisco for the 2012 season.
Smith had a breakthrough season last year, helping San Francisco reach the NFC Championship Game.
"Welcome Back #AlexSmith. Let's get the train rolling now," tweeted 49ers defensive lineman Ricky Jean Francois.
Both sides made it clear after the Niners' 20-17 overtime loss to the eventual Super Bowl champion New York Giants in the NFC title game they planned to work out a new deal.
It just took a little while longer than expected after Manning briefly entered the picture.
While Smith told the South Florida Sun-Sentinel on Sunday he was surprised Manning became a free agent, he said he understood the business side of the NFL.
"It's a very strong relationship," Harbaugh told reporters while leaving team headquarters Tuesday, noting nothing had changed in Smith being "our guy." He declined to discuss negotiations.
Last spring, Harbaugh handed over his playbook to Smith during a brief lifting of the lockout -- a show of confidence in the QB even though he wasn't under contract. Smith wound up re-signing for $4.9 million, then earned a $1 million bonus for making the playoffs as the 49ers ended an eight-year stretch without a postseason berth or winning record.
"I don't think there will be any bad blood because he went to Miami for an interview," former 49ers running back great Roger Craig said Tuesday. "That's part of the process; it's the nature of the beast. He has to do what's best for him and his family. I'm pretty sure the 49ers are going to work something out. Players love him, fans love him. I love him.
"I think Alex wants to get this put to bed so he can focus on having a great year, an All-Pro year this year," Craig said. "He doesn't want this dark cloud over him. It's really his time, and he understands the business. He knows it's a good situation."
Long booed by his home fans at Candlestick Park, Smith threw for 3,150 yards and 17 touchdowns with only five interceptions last year as San Francisco went 13-3 to win its first division title since 2002. That was a remarkable turnaround under first-year coach and 15-year NFL quarterback Harbaugh -- the NFL coach of the year -- who declared his confidence in Smith as a winner from Day 1 when hired away from Stanford in January 2011.
San Francisco went 6-2 on the road and won four of those games in comeback fashion -- and Smith rallied his team from behind five times in all, not to mention a 36-32 victory against the favored Saints in the NFC divisional playoffs. Smith completed a 14-yard touchdown pass to Davis with 9 seconds left to seal it after Drew Brees had put his team ahead.
"I can see these guys dominating for the next decade," Craig said. "The kind of intangibles Harbaugh brings to the table, he's very competitive and a smart guy and players believe in him, and just look how Alex stepped up his game."
Information from The Associated Press contributed to this report.