The Liga champions are ready to secure the Argentina international's future at the Santiago Bernabeu and have offered him an improved contract to match Karim Benzema
The Argentina international's current contract runs until the summer of 2016, but Los Blancos are keen to tie down the forward following recent speculation surrounding his future, and are willing to increase his wages from €3.5 million per season to €4.5m.
Higuain will thus be earning the same amount as fellow striker Karim Benzema, his competition for the lone No.9 position at the Liga champions.
Although both parties are believed to have agreed terms in principle, the contract renewal will not be made official until Madrid's pre-season tour of Los Angeles where club president Florentino Perez intends to meet with Higuain, before putting pen to paper.
The 24-year-old attacker joined Real Madrid from River Plate in January 2007, and has since scored 91 goals in La Liga in 162 appearances.