US National Intelligence Director John Negroponte is to leave his post to become the deputy to Secretary of state Condoleezza Rice, officials said.
John Negroponte was named to co-ordinate US spy agencies in 2005
A career diplomat, Mr Negroponte, 67, was named in April 2005 as the US's first intelligence chief, responsible for overseeing all spy agencies.
His new post is expected to be formally announced on Friday.
The nomination will have to be approved by the US Senate, where Democrats now hold the balance of power.
Mr Negroponte served as US ambassador to the UN from 2001-04 and ambassador to Baghdad until March 2005.
His appointment as the first US National Intelligence Director, reporting directly to President George W Bush, was seen as a significant promotion.
The BBC's Jonathan Beale in Washington says this switch to become Ms Rice's deputy may be seen by some as a strange career move - but it may also reflect the considerable diplomatic challenges the administration now faces.
News of the appointment comes as President Bush is set to announce a new strategy for Iraq, where US policy is widely regarded as a failure.
If his nomination is confirmed by senators, Mr Negroponte would replace Robert Zoellick, who stood down in July.
But with Democrats holding the balance of power in the Senate, the confirmation may not be an easy task, our correspondent says.
Questions have already been raised about his involvement in the illegal funding of the Contra rebels in Nicaragua in the 1980s.
Reports quoting a senior administration official said retired Vice Adm. Mike McConnell will be named by President Bush to succeed Mr Negroponte as national intelligence director.