Panetta lives in Monterey County.
He is considered a surprise pick for the post, with no experience in the intelligence world. An Obama transition official and another Democrat disclosed his nomination on a condition of anonymity since it was not yet public.
Panetta is a longtime congressman.
He served on the Iraq Study Group, a bipartisan panel that released a report at the end of 2006 with dozens of recommendations for the reversing course in the Iraq war.
Panetta currently directs with his wife Sylvia the Leon & Sylvia Panetta Institute for Public Policy, based at California State University, Monterey Bay a university he helped establish on the site of the former U.S. Army base, Fort Ord.
Retired Admiral Dennis Blair is Barack Obama's choice to be director of national intelligence.
Two Democratic officials said Monday that the former head of U.S. Pacific Command was the president-elect's choice for the post. They spoke on condition of anonymity because the announcement has not yet been made.
His nomination has been expected, unlike Obama's other intelligence choice of Leon Panetta to run the CIA. Blair served in the Navy for 34 years and he was chief of the U.S. Pacific Command during the Sept. 11, 2001 terrorist attacks. Blair is also a China expert, and he was an associate director for military support at the CIA.