Diess was regarded as a potential future CEO when he joined Volkswagen in July 2015 after serving as head of vehicle development for BMW.
The supervisory board will vote on the change in top leadership at a meeting on Friday, according to people familiar with the matter, who asked not to be identified speaking ahead of an official announcement.
After sources told dpa on Tuesday that brand manager Herbert Diess is set to replace current group chief executive Matthias Mueller, the firm's human resources manager also is set to go.
However, Volkswagen refused City AM's request to confirm whether Muller was resigning, and whether he would be replaced by Diess.
Diess, 59, has been restructuring the VW brand to bring its cost structure and efficiency closer to that of rival Toyota. "I don't see an obvious trigger that would have prompted this".
Under Mueller - who was promoted to the top job in the chaotic days following the public disclosure of cheating in emissions tests - VW has weathered the blows from the scandal while at the same time embarking on an aggressive expansion into electric cars. Its profit margin climbed to 7.4% of sales past year from 6% in 2015, when the crisis hit.
"If Diess is confirmed as the successor, VW shares will extend their gains", Evercore ISI analyst Arndt Ellinghorst said, who has an "outperform" rating on the stock. Porsche is a member of VW's supervisory board and the head of the family clan which owns a controlling stake in VW. The company sold a record 10.74 million vehicles, making it the world's largest carmaker, though the title is disputed by the Renault-Nissan-Mitsubishi alliance, which sold 10.6 million and says Volkswagen is counting trucks that aren't cars.
Mueller, a company veteran, was installed at short notice in 2015, a week after the company admitted to cheating US diesel emission tests, prompting criticism from some investors who said that only an outsider could rebuild trust in the business.
Representatives of Porsche and the German state of Lower Saxony, VW's two largest shareholders, weren't immediately available for comment. One possibility is increased autonomy for the group's various regional and brand divisions.