Chief Executive Nigel Howe revealed that talks are ongoing with the popular manager who has led the Royals to seventh in Division One.
Speculation in recent weeks had suggested that Reading's reluctance to offer their boss a new deal would result in him jumping ship come the end of the season.
Pardew has been linked with jobs at Ipswich, Stoke and Aston Villa in recent weeks.
Howe confirmed to readingfc.co.uk: "We are negotiating at the moment and I hope to be able to confirm something in the next week or so."
It is expected that once Pards has put pen to paper on a new deal a large number of his backroom staff will follow suit.
Alan Pardew became Reading boss in September 1999, his first job in management. He led the Royals from the bottom of Division Two to midtable in his first six months in charge before guiding the Royals to the Play-Offs the season before last and promotion last season.