Friedel's current deal runs out this summer, but the 39-year-old American has shown no signs of his form diminishing.
Villa manager Gerard Houllier had always indicated he would talk to Friedel about a new deal before the season ended, and Friedel's agent, Tony McGill said: "We are in talks over a new contract. Brad is very happy at Villa.
"If Brad was not happy, he would not be talking over a new contract.
"I have spoken with (Villa) chief executive Paul Faulkner and talks are going very well indeed."
Friedel, who last week rubbished claims of there being a player mutiny at Villa, spent seven years at Blackburn before moving to the midlands club in the summer of 2008.