Current Housing Secretary Shaun Donovan is expected to become the new White House budget director.
The president reportedly will announce the shake-up in a Rose Garden address later on Friday.
Mr. Castro, 39, clearly is a rising star within the Democratic party. He delivered the keynote address at the 2012 Democratic National Convention and is rumored to be a leading vice presidential contender for the 2016 cycle.
His nomination still must be confirmed by the Senate, but Mr. Castro already is receiving strong words of support.
“President Obama’s nomination of Julian Castro would be historic, one that would have made the [housing] department’s founder — Lyndon B. Johnson — very proud,” said Marc Rodriguez, chairman of the board at the United States Hispanic Chamber of Commerce. “In the 13 years Julian Castro’s held office in San Antonio, nobody has done more than this young, visionary leader to address his city’s housing needs. … It’s time to bring Mayor Castro to Washington, where he will produce the same results for the American people.”
Mr. Donovan, meanwhile, will replace current Office of Management and Budget Director Sylvia Mathews Burwell.
Ms. Burwell is on track to replace Kathleen Sebelius as head of the Health and Human Services Department.