Quade Cooper will sign a new four-year deal with the Australian Rugby Union and play at the 2016 Olympics rather than join Toulon.
Reports in the Australian media state that an agreement has been reached between Cooper and the ARU as the fly-half bucks the trend of players moving overseas.
Cooper's future has been confusing in recent weeks, with the 27-year-old linked with staying in Australia despite being pictured in a Toulon shirt a couple of months ago alongside owner Mourad Boudjellal.
How Cooper has been able to escape his contract with Toulon, or the fee that has been paid, remains unclear.
Fairfax Media first reported the story on Sunday saying that Cooper will devote the whole of next season to playing Sevens in preparation for the Olympics and return to Super Rugby in 2017, but not necessaraily with the Reds, who he has made over 100 appearances for since 2007.
"I've said consistently that I was keen for him to stay and be in the picture. You can see by him getting the first selection what we think about him as a player," Cheika told reporters after the Rugby Championship win over South Africa.
"With him, us helping him get to where he wants to go, I think we're still yet to see the best of Quade Cooper."
The Wallabies travel to Argentina on Monday.