O'Leary said that the Leeds chairman, Peter Ridsdale, had offered him the new deal last week and insisted: "I would love to stay and there are no problems with signing the contract from my point of view."
It will earn the former Republic of Ireland player a pay increase as a reward for steering Leeds into the top four of the Premiership and in developing youngsters such as Jonathon Woodgate and Alan Smith.
Now O'Leary is banking on Ridsdale and the board of directors giving him the necessary funds to bring in the quality players he feels are required to push Leeds onto the next rung of the ladder and be a League-challenging force.
"When I took over I tore up my old contract and had a pay rise, but the agreement was that I was working on the basis of having the two and a half years to go of my old deal. The club wanted to see what I could do. Now they want me to take the club on for the next five years and I am delighted," O'Leary said.
O'Leary's side gave another demonstration of their potential when they won 2-1 at Leicester on Monday, but he knows there is still much work to be done before the club can claim to be part of the elite. "The aim is to be able to challenge for the League over the next few years. There is quality in the current squad, but we are not in that position yet," O'Leary said.
"I want to buy quality, the people who will take us on for the next few years and get us up there in terms of squad quality. Hopefully I will get the backing to do that. Only time will tell on that issue."
Meanwhile, Leeds are to put forward detailed plans for the development of their Elland Road stadium after the Government gave the go-ahead to the club's expansion plan.
David Batty made his comeback for Leeds in a reserve match at Derby last night after three months on the sidelines with a rib injury. Batty, a pounds 4.5m signing from Newcastle, was taken off in the first half of his second Leeds debut against Coventry in December and has been out of action since.Reuse content