Warren would report to both the Treasury Department and the White House in a role that would not require Senate confirmation. The 61-year-old Harvard University professor and consumer advocate had been considered the leading candidate to head the bureau itself, but her lack of support in the financial community could have set the stage for contentious Senate hearings that might ultimately have derailed her confirmation.
The official spoke on condition of anonymity ahead of a formal announcement.
White House officials would not confirm the appointment, but Obama spokesman Robert Gibbs said an announcement could be made this week.
While Obama has long been a friend and supporter of Warren, he was keenly aware of the potential pitfalls of nominating a polarizing figure in the midst of a heated election year.
"I am concerned about all Senate nominations these days," Obama said during a news conference last week. "I've got people who have been waiting for six months to get confirmed who nobody has an official objection to and who were voted out of committee unanimously, and I can't get a vote on them."
The consumer bureau was created under the financial regulatory bill Obama signed into law earlier this year. It will have vast powers to enforce regulations covering mortgages, credit cards and other financial products, and be financed by the Federal Reserve.
The new bureau would consolidate consumer protection duties now spread across various regulatory agencies. The financial regulation law gives the Treasury Department the authority to run the consumer protection bureau while the nomination of its director is pending.
The law also says the Treasury secretary must transfer those functions to the new bureau within a year, but gives him latitude to seek an additional six months to complete the creation of the agency. That means Warren could, potentially, perform her new duties into 2012.
"I very much would like to see her directing that agency. Exactly in what form is less important to me that that she does it," Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, told The Associated Press on Wednesday. "If someone told me that a candidate for that job could be easily confirmed, I think that would be a disqualification."
The head of a liberal group that has been campaigning for Warren to get the top consumer job applauded the news, but added a note of caution.
"If this appointment is window dressing and (Treasury Secretary) Tim Geithner controls the show, it would be a big disappointment and a victory for Wall Street," said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee.
Warren has served as head of the Congressional Oversight Panel, charged with monitoring Treasury's handling of the $700 billion bank rescue fund known as the Troubled Asset Relief Program. She has at times clashed with Treasury over her committee's findings and conclusions about the use of TARP money.
As of Sept. 10, however, Warren stepped back from working on the group's latest report, a signal that the new Treasury post was a possibility.
Her pending appointment was first reported by ABC News.
It was unclear whether Obama also intends to nominate a permanent director for the job this week.
Others mentioned as contenders to lead the agency are Michael Barr, an assistant treasury secretary who was a key architect of the administration's financial regulatory plans, and Eugene Kimmelman, a deputy assistant attorney general in the Justice Department's antitrust division.