South Korea's incoming president wants to scrap a ministry handling relations with North Korea, his aides say.
Mr Lee advocates a tougher stance towards North Korea
Lee Myung-bak, who takes office on 25 February, will merge the Unification Ministry with the Foreign Ministry.
Four other ministries are being downgraded as part of what he says is a pledge to streamline government.
But Mr Lee advocates a tougher stance towards North Korea and the Unification Ministry has been accused of being too soft on Pyongyang in the past.
At the moment, inter-Korean relations are dealt with by the Unification Ministry, while the Foreign Ministry handles negotiations on the nuclear issue.
The two ministries are known to have disagreed in the past, with the Foreign Ministry preferring a tougher line.
"In light of inter-Korean relations becoming closer day by day, unification policy cannot be a monopoly of a certain ministry," Lee Kyung-sook, chief of Mr Lee's transition team, told journalists.
"All government agencies and ministries should make efforts to improve inter-Korean relations but consistency should be maintained in the framework of foreign policy," he said.
South Korea's current leader, Roh Moo-hyun, has pursued a policy of economic engagement with the North.
But Mr Lee says he wants greater concessions from the North, linking the provision of economic packages to progress on the nuclear issue.
Talks on denuclearisation are currently stalled, after North Korea missed a year-end deadline to fully disclose all of its nuclear activities.
The planned closure is unlikely to please North Korea, where state-run media outlets have still not acknowledged Mr Lee's election win.
The proposal has to clear parliament and liberal party lawmakers say they will fight it.
The other ministries to be closed or merged are maritime affairs, information, science and gender equality, at a loss of around 7,000 jobs.