Sources told ESPN.com's Pierre LeBrun that the extension with is worth $9.4 million over three years.
The deal will keep the 27-year-old with the team through 2014.
Moulson has 29 points (17 goals, 12 assists) in his second season with the Islanders.
Last season, he led the team in goals (30), while also setting career highs in assists (18), points (48) and games played (82). Moulson has yet to miss a game in his two seasons with the Islanders.
He was selected by the Pittsburgh Penguins in the ninth round of the 2003 draft.
Pierre LeBrun covers the NHL for ESPN.com. Information from The Associated Press was used in this report.