Martin believes Dibling, who is already tied down until 2026 with the option for a further year, is keen to ink a new deal at St Mary's.
The boss, who is not a part of the club's negotiations, insisted the terms offered to Dibling are "really good" for an 18 year old.
He told the Daily Echo: "There is an option that we can extend his contract, but I don't think we want to do that; we want to reward Tyler for his performances.
"I've spoken to Tyler's mum and dad about it, and I've spoken to Tyler about it but I'm not involved in any of the negotiations.
"It's down to Phil (Parsons, Saints CEO), the owners and Tyler's agent. That's where I think it gets tricky. I don't have any news for you on that.
"We have offered him a new contract, one that I believe is a really good contract for someone his age. At the minute, I don't think his agent agrees.
A detailed view of Tyler Dibling's boots and low socks during a Premier League game against Aston Villa.A detailed view of Tyler Dibling's boots and low socks during a Premier League game against Aston Villa. (Image: Jacob King/PA) "I think Tyler wants it done and I think Tyler's parents want it done but we will see how long it takes.
"I was told about some rumours that Manchester United wanted to buy him for £21million. I'm not sure they would get his left boot for that."
Dibling has enjoyed a rapid rise this season. He had only made one senior league appearance prior to 2024/25 but is now a regular in the Premier League.
The academy graduate earned his first start against Manchester United before scoring his first senior goal against Ipswich Town.
Martin reiterated that Dibling "understands what is important for him now" having briefly left Saints to join Chelsea when he was 16.
"Tyler left this club, he didn't enjoy it and he came back very quickly," Martin continued. "Tyler knows himself.
Southampton boss Russell Martin (left) and Tyler Dibling (right).Southampton boss Russell Martin (left) and Tyler Dibling (right). (Image: PA) "His parents and his family really understand what Tyler needs and they understand that he gets that from us here.
"He feels really trusted. He trusts us and we trust him. We are really demanding of him but in the right way.
"Tyler knows that he just needs to keep playing and getting better. There is a lot that he can improve on.
"He needs more goals and assists for the quality that he has. He's getting better and better all the time. It's always about timing.
"He's playing every week in the Premier League for the team he grew up with as a kid. I don't think there are many things better than that.
"He's not easily distracted. He loves football, he is the most relaxed boy ever. He is laid back and he understands what is important for him now."