The man known as Big Phil, who also led Portugal to a European championship and World Cup semi-final before a short, unsuccessful spell with Chelsea, would be officially named on Thursday to replace the sacked Mano Menezes, the source said.
Carlos Alberto Parreira, who led Brazil to their fourth world title in 1994, would be named technical director, according to another source close to the federation.
In his first stint as coach, Scolari took over with the team in disarray, turned around the situation and led them to an unexpected triumph against all odds in barely more than a year at the helm, resisting public demand for him to pick an aging Romario.
However, many feel that the 64-year-old, who declined an offer to continue after the 2002 tournament, has lost his magic touch.
In his most recent job, he quit Palmeiras in September after a dismal run left them near the bottom of the Brazilian championship. They did not recover and were later relegated.
Scolari will have to cope with huge pressure and enormous expectations from his 190 million compatriots.
Brazil's vast and fickle army of supporters always expect them to win the World Cup and the pressure will be even greater as the country hosts the event.
Their failure to win on home soil in 1950, when Uruguay beat them in the decisive match before a 200,000 crowd at the Maracana, still rankles and the members of that team found themselves shunned for years afterwards.
"Pressure will be great at the World Cup and that's understandable, and we need someone who can cope with that," CBF president Jose Maria Marin told reporters at an event in Sao Paulo.
"We need everyone to get behind the new coach," he said, adding that the official announcement would be made on Thursday.
"We did a thorough evaluation and what we need is someone with the right skills, dedication and experience. I am absolutely certain that the fans will be happy with our choice," added Marin.
This time, Scolari will inherit a team which has been steadily taking shape under Menezes but with the CBF in a state of turmoil following his predecessor's shock dismissal on Friday.
While Marin was talking to reporters, national teams director Andres Sanchez, who publicly opposed the decision to fire Menezes, quit his post.
Marin had previously said Menezes's replacement would be named in January but was forced to backtrack by the embarrassing prospect of going into Saturday's Confederations Cup draw without a coach.
"This shows that there is no crisis, that everything is under control," said the 80-year-old Marin, who took over the CBF in March after Ricardo Teixeira quit citing health problems and amid allegations of corruption.
Commentators were baffled as to why Menezes, who had been painstakingly rebuilding the Brazil team since the 2010 World Cup, was sacked just as his side appeared to be finding their rhythm and showing promise.
Menezes admitted that Brazil had fallen behind world and European champions Spain but the attacking combination of Oscar, Neymar and a revitalised Kaka had begun to make them look like a world-class team again.
Scolari's challengers for the job were Abel Braga, coach of Brazilian champions Fluminense, Tite, who led Corinthians to the Libertadores Cup title this year, and Muricy Ramalho of Santos. Former Barcelona coach Pep Guardiola has also been touted as Brazil's first foreign coach.
The choice quickly divided opinions.
"I don't think a coach who led a team to the second division deserves to be coach of the national team," Brazil's 1970 World Cup captain Carlos Alberto Torres said at the Soccerex conference in Rio de Janeiro.
"It's a matter of timing. At the moment, the names would be Muricy (Ramalho), Tite and, especially, Abel Braga, coach of the Brazilian champions."
However, Zico, who played in three World Cups, approved the choice of Scolari and Parreira.
"It's a fantastic pair for the national team, who know Brazilian football inside out," he said. "They are both top level and helped Brazil win World Cups. The team is in good hands."
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