The Vatican is to ban all gay men from joining the clergy even if they accept a vow of celibacy, reports say.
The Pope wants the Catholic church to focus on traditional values
The late Pope John Paul II ordered a review of the Catholic church's policy on homosexuality after US priests were involved in child sex abuse.
A formal announcement is expected in the coming months, but Vatican sources have confirmed US newspaper leaks.
The Vatican has regularly made clear its opposition to gay priests, calling homosexuals "intrinsically disordered".
The Papal "instruction" is expected to deal with concerns in Rome about the extent of a latent homosexual sub-culture at Catholic seminaries.
Practicing homosexuals are barred from the priesthood, but celibate gay men are commonly ordained, although many keep their sexual orientation secret.
Some estimate that more than 25% of US Catholic priests are non-practicing homosexuals.
An inspection of the 229 Catholic seminaries in the US is due to begin this month.
The review, known as an Apostolic Visitation, will examine whether there is "evidence of homosexuality" within the seminary.
Speaking to the New York Times, an anonymous Vatican official said the new ruling would address the issue of temptation among those attending seminaries.
"The difference is in the special atmosphere of the seminary. In the seminary you are surrounded by males, not females."
The BBC's David Willey in Rome says that Pope Benedict is mindful of the splits which have been occurring in the Anglican church over the appointment of gay priests and bishops, and wants to clean up the Catholic church's image.
Observers say the Pope's willingness to tackle the issue just months after succeeding John Paul II demonstrates his commitment to a conservative, traditionalist Catholicism.
But some Catholic leaders say there is no proof of any direct connection between the presence of gay clergy in the church's ranks and child abuse scandals.
Instead many priests appear to feel threatened by the Vatican's decision.
"I've heard straight priests say... they're embarrassed by it," one anonymous gay US priest told the Associated Press.
"I've heard priests both gay and straight seriously consider leaving.
"They couldn't believe that after centuries of either explicit or implicit welcoming of celibate gay clergy that church would turn its back on them."