President Obama is expected to nominate San Antonio Mayor Julian Castro for housing secretary on Friday and will nominate Shaun Donovan, his current housing chief, to run the budget office, a White House official said.
Obama is expected to announce the latest Cabinet shuffle at the White House after returning from an overnight trip to Chicago. He will be joined by Castro, a 39-year-old Democratic up-and-comer, and Donovan, 48, who has led the Department of Housing and Urban Development since the start of Obama's presidency in 2009.
The moves would raise the profiles of two men with close ties to Obama.
Obama chose Castro to deliver the keynote address at the 2012 Democratic National Convention and he has been a rising star in the party ever since. Donovan is highly regarded inside the White House, where officials have lauded his work overseeing the federal government's response to the devastation Hurricane Sandy unleashed on the East Coast in October 2012.
As budget director, Donovan would have significant sway over the administration's policy and spending priorities.
If he is confirmed by the Senate, the three-term mayor would become one of the highest-ranking Hispanic officials serving at the pleasure of the president. Castro has been talked about as a possible Democratic candidate for vice president in 2016. Donovan, already confirmed for the HUD job, would be expected to win confirmation a second time for the new post.
Donovan would replace Sylvia Mathews Burwell as director of the White House Office of Management and Budget. Obama recently nominated Burwell to become secretary of health and human services following the resignation of Kathleen Sebelius after the disastrous rollout of the federal website for consumers to buy insurance coverage under Obama's health care law.
Obama has previously tried to offer Castro a Cabinet post, but the mayor decided to stay in San Antonio and handily won a third term last year.
"This was a job I really did look forward to growing up, when I thought about politics," Castro said in 2011 about being mayor. "So I'm not in a hurry to leave."
Still, Castro and his twin brother, Rep. Joaquin Castro, D-Texas, have become popular figures on the Democratic fundraising circuit. Julian Castro in particular is seen as a possible running mate in 2016 for a party that has staked its success in presidential elections in part on winning broad support from Hispanics.
Serving in Obama's Cabinet would help broaden Castro's experience beyond local politics.
HUD plays a key role in the "Promise Zone" initiative, a federal effort to revitalize high-poverty communities by increasing economic activity, improving educational opportunities and leveraging private capital. San Antonio was among the first cities to receive a grant for the program from the administration.
Donovan is seen by Obama advisers as a strong manager.
"In the aftermath of Sandy, when we thought about who was somebody who we had confidence could drive a process to make sure that the federal, state and local coordination delivered for the people who had been affected, and that we could rebuild both on the New York side and the Jersey side as effectively as possible and as quickly as possible, Shaun came to mind," Obama said recently.
The director of the Office of Management and Budget is a Cabinet-level post under Obama. Those who have held the job earlier in the administration, including current Treasury Secretary Jacob Lew, have played crucial roles in setting budget priorities and negotiating fiscal agreements with Congress.
The Associated Press contributed to this report.