The pair will collaborate live at the music event on June 4, which has been organised by the Take That star to celebrate the Queen's 60-year reign.
"There are already huge names appearing on the bill but Cheryl is the cherry on top," a source told The Mirror.
"She is one of the biggest stars in Britain and will ensure young people tune into the concert. She doesn't do many live appearances but when Gary asked her she couldn't turn him or the Queen down."
They continued: "She is promising a spectacular performance and I am sure the Princes will all be happy she is on the bill."
An insider close to Cole added: "She is excited and loves working with the royal family, so she can't wait to perform. No-one is supposed to know she is on the bill so exactly what she is doing and singing is top secret."
Reports have suggested that the duo will perform a cover of US country act Lady Antebellum's 'Need You Now' in front of the 10,000 strong crowd at Buckingham Palace.
Cole and Gary Barlow were due to duet at last November's Children In Need Rocks Manchester concert, but it was cancelled after the Girls Aloud star fell ill.
Sir Elton John, Stevie Wonder, Kylie Minogue, Sir Paul McCartney, Jessie J, Robbie Williams and Ed Sheeran are among the performers for Monday's Diamond Jubilee concert.
Cole's new single 'Call My Name' will be released in the UK on June 10, while her third album A Million Lights follows on June 18.
Watch the music video for Cheryl Cole's 'Call My Name' below: