The extension will begin with the 2015-16 season and includes a player option for 2017-18, according to Wojnarowski. Gay is currently in the final year of his contract and is set to earn $19.3 million this season.
Wojnarowski reports that the Kings have wanted to sign the 28-year-old to an extension for several months and he recently decided to turn down the chance to become a free agent next summer to reach an agreement with Sacramento.
A former first-round pick in 2008, Gay spent the first six and a half years of his career with the Memphis Grizzlies. In his first year with the Kings last season, he averaged 20.1 points, 5.5 rebounds and 3.1 assists in 55 games.
Through 10 games in 2014-15, Gay is averaging 22.5 points, 6.8 rebounds and 3.5 assists.
The Kings (6-4) host the New Orleans Pelicans (5-3) on Tuesday.
- Molly Geary