The decision overturns a 1994 rule barring women from being assigned to small ground-combat units, and follows years of calls for a fully inclusive military.
The move could open hundreds of thousands of front-line positions and potentially elite commando jobs to women.
Some jobs may open as soon as this year, while others, such as special operations forces, including Navy SEALs and the Army's Delta Force, could take longer.
In November, four American female military officers, who had fought in US-led wars in Iraq and Afghanistan, sued the defense department over the ban on women in direct combat duties, saying that it was unconstitutional.
Women make up 14 percent of America's 1.4 million active duty personnel, or about 204,000 service members, according to the Pentagon.
US Defense Secretary Leon Panetta has decided to remove the military's ban on women serving in combat roles, a senior Pentagon official says.
Panetta and General Martin Dempsey, the chairman of the US Joint Chiefs of Staff, "are expected to announce the lifting of the direct combat exclusion rule for women in the military [on Thursday]," AFP quoted the defense official, who spoke on condition of anonymity, as saying on Wednesday.
"This policy change will initiate a process whereby the services will develop plans to implement this decision, which was made by the Secretary of Defense upon the recommendation of the Joint Chiefs of Staff," the official said.
Military chiefs will be asked to report back to the defense secretary by May 15 on their initial plans to implement the new policy.