The 'Skyscraper' musician, who was first linked with the panel earlier this month, will attend Fox's upfronts presentation for an official announcement tomorrow morning (May 14), according to TMZ.
Britney Spears is also expected to be confirmed as a judge at the event in New York City.
Spears's X Factor agreement for the season is rumoured to be in the region of $15 million (£9.3 million).
Insiders have claimed that the X Factor USA production schedule has been worked around Lovato's existing touring commitments to ensure minimal disruption.
Spears and Lovato - if confirmed as X Factor judges tomorrow - will join Simon Cowell and LA Reid at the judges' table, replacing Nicole Scherzinger and Paula Abdul.
The X Factor USA is due to return to Fox later this year, with initial auditions for the show's second season already underway.
Watch Demi Lovato's video for 'Give Your Heart a Break' below: