Blades skipper Sharp, who is the highest English league scorer this century with 220 goals, is to be handed a new deal by his promotion chasing hometown team.
Bramall Lane boss Chris Wilder revealed: "Billy's current contract runs out in the summer, but he has an option to extend it for a further year after racking-up 23 appearances this term.
“He will trigger the clause that keeps him with us for at least another 12 months after reaching that number in our win over QPR last Saturday, and we are delighted."
Sharp, 32, has notched 16 times in the Championship this campaign as the Blades have surged to second in the table, just four points adrift of their big Yorkshire rivals Leeds.
And he admitted:"I'm a Sheffield lad, a Blade, and my biggest ambition is to play for Sheffield United in the Premier League.
“I believe I can score goals in the top flight and, hopefully, I will get the chance to do just that.
“I am looking forward to signing a new contract at the club. I've still got a lot to offer, and I want to be celebrating many more goals in front of the fans at Bramall Lane."