The London club are keen to keep the Ecuador star, who has been linked with a move to Chelsea.
The Premier League club are keen to reward Valencia for an impressive debut campaign and ward off suitors tracking the 25-year-old attacking midfielder.
Valencia joined the Hammers last summer from Mexico club Pachucha for £12 million after rising to prominence with his displays for Ecuador in the World Cup.
He has scored five goals in 33 appearances for West Ham but it is his scorching pace and trickery that have really caught the eye and brought him to the attention of Champions League clubs.
Chelsea and Liverpool are among the marquee teams who have been linked with a move for Valencia by the Daily Mail amongst other sources.
The player signed a five-year contract last summer that reportedly includes a release clause.
Sources close to West Ham understand the club are ready to rip up that deal, remove the buy-out clause and offer fresh terms, including a substantial pay rise.
The 11th-placed Premier League club want to keep hold of the flair players who have been integral to the more entertaining displays under manager Sam Allardyce this season.