Payton, who has coached the Saints for 10 years, revealed the news Wednesday during his news conference at the NFL owners meetings in Boca Raton, Fla. The coach said he has the contract in his briefcase and plans to sign it soon.
The extension is worth in excess of $45 million, a source told ESPN's Ed Werder. The 52-year-old Payton made $8.5 million in his previous deal, which ran through 2017.
"Another five years means a lot," Payton said.
Payton said he worked out the details with general manager Mickey Loomis and president Dennis Lauscha.
"There's so much of you in there, that I don't see myself working anywhere else," Payton said. "There's been really good stability and consistency at ownership. We just had dinner with Mr. B (owner Tom Benson) last night, Mickey, and I think that doesn't guarantee anything, but it gives you a chance. It's been very functional. That stability, obviously, I don't take for granted."
Payton has an overall record of 93-61, including a 6-4 postseason mark in nine seasons with the Saints. He was suspended for the 2012 season in connection with the NFL's bounty investigation.
The Saints won the franchise's only Super Bowl title under Payton.
Meanwhile, the Saints are continuing negotiations with quarterback Drew Brees on a proposed four-year contract extension which would also keep him with the team through the 2020 season, according to ESPN.
Brees, who has one year remaining on his own contract, has a NFL-high salary cap figure of $30 million for 2016.
"I know Mickey and (Brees' agent, Tom Condon) have had quite a bit of discussion in the last week and a half," Payton said Wednesday. "I would say ongoing now."