"It's done," the former Discovery leader was quoted as saying in Wednesday's Gazzetta. "We've reached an agreement."
Basso, who was recently cleared to race by the Italian Cycling Federation following a five month suspension for doping allegations, would receive $6 million (4.69 million euros) over three years to race with Discovery according to the report.
The official announcement was expected to come on Wednesday afternoon in Austin, Texas, Armstrong's home state.
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"It will be official this afternoon," Basso's manager Giovanni Lombardi said.
Basso was considered the favourite to win the 2006 Tour de France before he was incriminated in the Operation Puerto doping investigation in Spain and suspended on the eve of the race along with Jan Ullrich and several other race contenders.
But after the ruling judge in the Spanish doping trial said that no evidence from his case could be used in sporting tribunals, the Italian Federation dropped its disciplinary hearings against the rider.
Basso and his CSC team ended their contract on amicable terms just prior to the federation's decision.
Though the 28-year-old is perhaps the most highly coveted talent in the sport, the International Cycling Union has said it could still appeal the Italian body's ruling to the Court of Arbitration for Sport in an attempt to prevent Basso from racing on the Pro Tour.
In the past Discovery Channel sporting director Johan Bruyneel has told eurosport.com that he would not sign Basso until he was "officially" cleared and that the UCI would have the final decision.
One possibility is that Basso could submit to DNA testing as requested of all riders by the International Association of Professional Cycling teams (AIGCP) two weeks ago.
Basso has been insistent that he did not want to resort to DNA testing to clear his name, however.
The Operation Puerto investigation broke in May, while Basso was claiming his Tour of Italy victory, when Spanish civil guard raided the offices of Dr. Eufemiano Fuentes uncovering a large quantity of medical supplies such as anabolic steroids, laboratory equipment for use in blood transfusions, and more than 100 frozen packs of blood.
Basso had hoped to accomplish the Giro-Tour de France double before his suspension and has said that his goal for 2007 will again be the same.
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Pro Tour 2007
Basso denies taking drugs