Obama will also nominate Army General David Petraeus, the head of U.S. and NATO forces in Afghanistan, to replace Panetta as CIA director, and veteran diplomat Ryan Crocker as U.S. ambassador to Afghanistan, U.S. officials said.
The long-anticipated changes, which must be confirmed by the Senate, would place a long-standing Democratic Party figure at the helm of the Pentagon as Obama presses forward with politically delicate policies in Afghanistan and Libya.
The administration and Congress also face mounting calls for defense spending cuts as Washington looks for ways to narrow the yawning U.S. budget deficit, which stands at $1.4 trillion this year.
The current defense chief, Robert Gates, was appointed by former President George W. Bush, a Republican, and has proved to be an outspoken maverick on key issues under both administrations. Gates, himself a former CIA director, had made it clear that he would step down as defense chief this year.
Panetta, who turns 73 in June, is a former U.S. representative from California who served as chairman of the House Budget Committee. He was former President Bill Clinton’s budget director, then chief of staff.