The deal will apparently see the boys staying with mentor Simon Cowell until at least the end of 2015.
A source said: “Simon Cowell and One Direction are delighted to confirm they have agreed to continue their hugely successful relationship with a new long-term agreement with Syco
“Simon and the band look forward to many years of continued success together.”
Their third album, Midnight memories, isn’t due to be released until November this year but the band have already started working on their fourth.
Another source added: “The boys, Simon and their team have already started planning their fourth album, even though the third isn’t out yet.
“[the deal] is worth a lot of cash too. They’ll get a big, upfront payment worth millions then much more from record sales, tours, brand tie-ins and merchandise.”
It was predicted last month that the boys would have grossed £775milion in just 12 months which, added to their new deal, could see One Direction become the first billion dollar band.
The boys will embark on a huge stadium tour in 2014 to support their new album.