Gruden was then traded to the Tampa Bay Buccaneers.
Steve Corkran of RaidersSnakePit.com first reported the news.
ESPN reported that Gruden would receive a 10-year deal that will be the longest coaching contract in NFL history and could be worth close to $100 million U.S., which would make him the highest-paid coach in league history.
Gruden, who coached Oakland from 1998 to 2001 and has been working as an ESPN analyst, is returning to the Raiders to replace Jack Del Rio, who was sacked after the regular-season finale on Sunday.
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So far there has been no official confirmation from the team. It is believed that he will bring in well regarded Cincinnati Bengals defensive coordinator Paul Guenther to run his defense.
Gruden posted a 38-26 record with Oakland from 1998-2001, guiding the team to a pair of playoff berths and the AFC Championship game in his last two seasons.
This season Oakland missed the playoffs with a final record of 6-10, after ending a 14-year postseason drought a season ago finishing 12-4. Overall, Gruden is 95-81 in 11 seasons. He was sent to the Buccaneers in a rare trade of an National Football League coach by late Raiders owner Al Davis.
Other teams have also done it, with one of the most recent notable coaching hires being Joe Gibbs in Washington.
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