Nielsen is an attorney who has experience in homeland security and cybersecurity, having served on the White House Homeland Security Council under President George W. Bush.
The Homeland Security Department's top job has been vacant since July, when Kelly was given the chief of staff role after the ousting of his predecessor, Reince Priebus. She moved with Kelly to the White House when Trump tapped him as chief of staff.
Prior to Nielsen's work for the current administration, she consulted on homeland security and preparedness matters, according to her biography at The George Washington University where she was a senior fellow at the school's Center for Cyber and Homeland Security.
Mr. Kelly, who has relied on Ms. Nielsen's counsel and expertise since he was preparing for his January confirmation hearing to be Homeland Security secretary, had pushed hard for her selection.
Around that time, two sources familiar with the search for a permanent DHS secretary told ABC News that the effort was back at "square one", though Trump said a decision was coming within a month.
The official announcement could come as soon as Wednesday, although the officials cautioned nothing is set until Trump publicly announces her as the pick.
She is now the White House principal deputy chief of staff.
Other contenders for the Cabinet post included Tom Bossert, Trump's homeland security adviser, and Kevin McAleenan, the acting commissioner of U.S. Customs and Border Protection.
Added Frances Townsend, her boss at the White House during the Bush administration: "She is tough as nails, competent and has rightly earned the president's respect".
Politico first reported the appointment.