The Stepney-born fullback, who turned 21 in December, has made a spectacular breakthrough for Arsenal and England in the past year and his reward is a deal that will tie him to Highbury until June 2007.

Manager Arsene Wenger said today: 'We have not yet put pen to paper, but it will happen soon. I am happy because it shows there is stability at the club and because Ashley is an excellent young player who has become stronger and better in the last year - and he is still improving.

'He's a great character, is a real competitor and is a great example to homegrown players at Highbury. He's shown what can be achieved.'

Cole started as a trainee at Highbury and after a spell on loan at Crystal Palace in 1999, he returned to become a first-team regular and break into the full England side.

Arsenal's title challenge will be interrupted on Sunday when they play Liverpool in an FA Cup fourth round tie at Highbury - a repeat of last year's Final at Cardiff which Liverpool won 2-1.

Wenger added: 'We still remember that because every big defeat is a painful one. We were the better team in the Final and we want to show that again.'

Fredrik Ljungberg, scorer for Arsenal at Cardiff last May and also in the two league games against Liverpool this season, is still out with the ankle, knee and rib injuries he collected in a collision with Leeds' Jason Wilcox last Sunday.

Ray Parlour, who hurt his back in the 3-1 win at Leicester on Wednesday, should be fit for a game Wenger feels will be more fluent than the two tense and taut Premiership encounters in the last month that have finished 2-1 to Arsenal and in a 1-1 draw.