According to The Sun, the couple are preparing to issue a statement after a string of "shouting matches" around Ritchie's 40th birthday ruined their recent attempts at a reconciliation.
"It's very sad. They were a great couple and brilliant parents," said a source. "They just couldn't live together anymore.
"Despite huge attempts to patch things up, they both knew deep down that divorce was on the cards. They tried hard over the last few months but their fighting was getting out of control."
Ritchie has allegedly postponed work on his new Sherlock Holmes movie to speak to his parents about the break-up.
Speculation about the couple's relationship began in June when Madonna was rumoured to have hired the services of divorce lawyer Nicholas Mostyn QC.
Despite rumours of an affair with baseball star Alex Rodriguez emerging later that month, the popstar issued a strongly worded statement in July, which denied a split was imminent.
The couple's children and the amount of time Madonna spends in America are apparently behind the pair's recent conflicts.
Ritchie and Madonna, who married in Skibo Castle Scotland in 2000, have two children together, Rocco, 8, and adopted David Banda, 2. Madonna also looks after daughter Lourdes, 12, from a previous relationship.