The official announcement is planned for Tuesday and follows weeks of consideration of the Thomson Correctional Center as a site for Guantanamo detainees.
Obama ordered the shutdown of the detention center as one of his first acts after inauguration in January. But closing it has proved to be cumbersome, largely because of the difficulty of finding other places to hold the terrorism suspects.
Illinois and local officials suggested the near-vacant Thomson prison, near the Mississippi River and the Iowa state line. Construction on the prison started in the 1990s and was completed in 2001.
The U.S. is already in the process of sending detainees to their home countries and to third countries on what aides call a "rolling basis" throughout this year. U.S. Attorney General Eric Holder recently announced prosecutions in federal courts and military commissions that will begin soon.
The Thomson prison could house 35 to 90 of the Guantanamo detainees, said one source familiar with the discussions.
Toward that end, Obama has directed that the federal government proceed with the acquisition of the Thomson prison center, an administration official said late Monday. The official said the prison would house federal inmates as well as "a limited number of detainees" from Guantanamo Bay.
"Closing the detention center at Guantanamo is essential to protecting our national security and helping our troops by removing a deadly recruiting tool from the hands of al-Qaida," the administration official said.
The announcement on Tuesday "is an important step forward as we work to achieve our national security objectives," the official said.
U.S. Sen. Dick Durbin and Illinois Gov. Pat Quinn are scheduled to be in Washington on Tuesday afternoon to be briefed on the decision by administration officials at the White House. Democrats, Durbin and Quinn have been major backers of the project.
Administration officials have estimated some 3,800 jobs would be created in and around Thomson to operate the prison.
At present, there are 210 detainees in custody in Guantanamo Bay. About 90 of them have been cleared for transfer back to their native countries or sent to other countries. Five are being turned over to the Department of Justice for federal trial in New York.
The plan for Thomson has been under consideration for weeks, as first reported by the Tribune's Washington bureau. Over the weekend, administration officials said they were closing in on Thomson as a leading candidate for Guantanamo inmates, but that they hadn't made a final determination.
In previous discussions, aides said the federal government would operate the Thomson site as a prison for its highest-risk inmates, and also turn over a portion to the Department of Defense to take transferees from the U.S. military prison in Cuba.
The administration has also considered the possibility of operating a military tribunal at or near the prison, where the government would try combatants charged with acts of terrorism. Officials did not comment on that idea Monday.
The Thomson site could become the sole location for what the administration calls "long-term detainees," those suspects who will remain in custody but who are not likely to stand trial.
State Sen. Jeff Schoenberg, D-Evanston, who is co-chairing a state panel that will hold a hearing on the issue, said word from the White House is "consistent with everything that I've been led to expect."
"All the signs have pointed toward the Obama administration selecting Thomson as the site," Schoenberg said.
Schoenberg noted that multiple communities have weighed in with resolutions supporting Thomson's effort to become a federal prison.
"For those who live in that job-starved portion of the state, this is undoubtedly very welcome news," Schoenberg said. "Even the most conservative estimates of the economic impact that this would have are considerable."
A hearing on the Thomson prison is set for Dec. 22 in nearby Sterling before a bipartisan legislative panel, the Commission on Government Forecasting and Accountability. The commission will make an advisory recommendation that the Quinn administration can accept or reject on whether to close the prison, which has never been used to its capacity.
The Quinn administration has said that lawmakers do not need to pass legislation for the sale to take place. After the recommendation from the panel, the Quinn administration can sell the prison under the state's surplus property act.
But Republicans have questioned whether the prison can be declared surplus or sold without further action, and they have asked Illinois Attorney General Lisa Madigan for an opinion on the matter. A Madigan spokeswoman said the office has yet to respond.