The former Chelsea player took over the reins at the Hawthorns last summer, and guided the club to an impressive eighth-placed finish in the Premier League in the 2012-13 campaign – his first season as a manager.
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“Steve’s contract situation was discussed at last month’s board meeting,” West Brom sporting and technical director Richard Garlick said in the statement.
“We decided that we would open talks with Steve in the New Year which, historically, we feel is the appropriate time to address such matters.
“We have got an extremely busy period ahead, with important games coming thick and fast.
“Once the Christmas period is out of the way, we plan to sit down with Steve and discuss his future.
“Steve is aware of our plans and has told us he is comfortable with the situation.”
Clarke enjoyed spells as a coach at Newcastle, Chelsea, West Ham and Liverpool before taking up his role at West Brom.