The 61-year-old Italian has been offered a four-year deal by the Football Association following “extremely positive” talks in London.
“It is understood Capello has agreed in principle to take the job,” reports BBC Radio 5.
Capello, who has coached AC Milan, Real Madrid, Juventus and Roma, succeeds Steve McClaren, who was sacked after England failed to reach Euro 2008.
In 16 years as a coach Capello has won nine league titles and one Champions League title. He made his managerial reputation at AC Milan, whom he guided to four domestic championships and European glory in the 1990s.
He later steered Roma and Juventus to the Serie A title and twice topped the table in Spain with Real Madrid.Capello, capped 32 times by Italy, has already had a role in English football history.
In 1973 he scored the winner in Italy's 1-0 win over England at Wembley and helped hasten the end of Bobby Moore's international career.
That match marked the 108th and final international appearance by Moore, England’s 1966 World Cup-winning captain.
Gianfranco Zola, who became a fans’ favourite during his seven-year spell with Chelsea which ended four years ago, and Arsenal’s French manager Arsene Wenger are both convinced that Capello has all the credentials required to be England manager even though Wenger has, in the past, ruled himself out of the job because he isn’t English.