Ancelotti successfully guided Brazil to World Cup qualification after taking charge following his departure from Real Madrid at the end of last season.
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The Brazilian Football Confederation (CBF) is delighted with Ancelotti's job and has been working on an extension for some time.
It has previously been reported that the 66-year-old and CBF are in advanced negotiations.
Now The Athletic says that the parties have reached an agreement.
It is only a formality before Ancelotti signs a new contract until the summer of 2030.