The expected delisting comes as North Korea moves to restart a disabled nuclear reactor.
It also follows days of intense internal debate in Washington and consultations with US negotiating partners.
Neither the White House nor the state department would comment on the decision, which has been in the works since Christopher Hill, the chief US negotiator, returned from a trip to North Korea last week.
"We would hope and expect that if the process is going to move forward, that they take active steps to reverse what they have done"
Sean McCormack, US state department spokesman
Hill met North Korean officials for talks in Pyongyang and it was there that a breakthrough was achieved, South Korea's Chosun Ilbo newspaper quoted a key government official in Seoul as saying.
But earlier on Friday, US officials said they were trying to build consensus among negotiating partners on the step as well as the inspection regime that Washington insists must accompany the delisting.
"We're continuing to work with our six-party partners," Dana Perino, the White House press secretary said, referring to China, Japan, Russia and South Korea, which along with the United States and North Korea constitute the group of countries working on the deal.
At issue was whether tentative arrangements worked out last week between Hill and the North Koreans were acceptable to the others.
Under those terms, the US would provisionally remove North Korea from the terror list once the North agrees to the inspections.
Sean McCormack, the US state department spokesman, dismissed suggestions the US was trying to force an agreement on its partners and declined to say which, if any, countries were preventing a consensus.
The Washington Post quoted sources close to the Bush administration as saying the North could imminently be removed from the terror list.
No named source has confirmed the imminent prospect of a deal.
Analysts say such a deal could halt the recent downward spiral in bilateral relations.
North Korea wants to be removed from the US list of state sponsors of terrorism in order to access international aid and loans, and as a step towards its diplomatic rehabilitation.
The disarmament process had seemed close to collapse after the latest row between Pyongyang and Washington.
North Korea began disabling its Yongbyon nuclear reactor in August, but lately it has made moves to reassemble the plant after a US refusal to remove it from the terror list.
McCormack said North Korea would be required to halt and reverse its recent actions.
"We would hope and expect that if the process is going to move forward, that they take active steps to reverse what they have done over the past month," he said.