He arrived at the club a year ago from Wolves and has impressed new manager John Caulfied.
The 22-year-old Ballybofey man, who can play in defence and midfield, was once chased by both Celtic and Manchester United but chose instead to join Mick McCarthy’s Wolves.
After suffering injury he played Major League Soccer in Vancouver before returning to Ireland to sign for the Turner’s Cross club.
An official announcement on the appointment of Dunleavy’s captaincy is expected to be made shortly.