Arroyo would receive a $2 million buyout if the option is not picked up.
Arroyo, 33, established a career-high in wins this season as he went 17-10 with a 3.88 ERA in 33 starts. He pitched 5 1/3 innings for a no-decision in Friday's 7-4 Reds loss to the Phillies in Game 2 of the National League Division Series.
In five seasons with Cincinnati, Arroyo is 70-60 with a 3.97 ERA over 169 starts.
Since being traded to the Reds from the Red Sox for outfielder Wily Mo Pena during Spring Training in 2006, Arroyo has been nothing short of dependable. He has worked 200 or more innings and made at least 32 starts in the each of his past six seasons. He has never had to go on the disabled list.
Arroyo, who has also posted 15 or more wins for the Reds in each of the past three seasons, said negotiations had already commenced.
"We've had preliminary talks about a multiyear deal," Arroyo said after a club workout Saturday. "I don't know if it'll get done, but it's definitely the opportunity to get it done. I definitely want to stick around here a few more years. We've got a good ballclub of young guys who have a chance to stay together for a while, based on age and monetary things."
Arroyo's desire to remain with the Reds shows how much the city of Cincinnati has grown on him. He loved pitching in Boston and initially expressed his disappointment about being traded not long after he signed an extension with the Red Sox, a perennial contender in a major media market.
But the charismatic Arroyo became popular with Reds fans especially after he became an All-Star during his first season with the team. In 2007, he was signed to a two-year, $25 million extension while still completing the earlier contract.
As for the next possible extension, Arroyo wasn't expecting it to be too long, but long enough.
"I don't think they're willing to go past three years -- the option and two years," Arroyo said. "I'll take as long as possible because I enjoy playing in the same place. I feel like I can stay healthy and give the team their money's worth."
Mark Sheldon is a reporter for MLB.com Read his blog, Mark My Word and follow him on Twitter @m_sheldon. This story was not subject to the approval of Major League Baseball or its clubs.