Donaldson, the 2015 American League MVP, and the Blue Jays had been scheduled for an arbitration hearing on Feb. 15.
Neither side has confirmed the deal, but Donaldson tweeted shortly before the Sportsnet report was published Monday night.
Donaldson, 30, was acquired by the Blue Jays in a blockbuster trade with the Oakland Athletics in November 2014. He was instrumental in helping Toronto end its 21-year postseason drought.
Donaldson became the second AL MVP in franchise history. He batted .297 with a career-high 41 home runs while leading the league in RBIs (123) and runs scored (122).
Donaldson deal maintains harmony in Jays' organization
ESPN senior baseball writer Jerry Crasnick explains how the Blue Jays and American League MVP Josh Donaldson avoided salary arbitration by agreeing to a two-year contract worth nearly $29 million.