ABC reports that Emanuel has not made a final decision yet, but that the White House is preparing for an announcement on Friday, the same day Congress adjourns for recess.
On Sunday, David Axelrod, White House advisor and good friend to Emanuel, said that Emanuel has always believed the coolest job in the world would be mayor of Chicago.
"One day, I would like to run for mayor of the City of Chicago," Emanuel said in April during an interview with Charlie Rose. "That's been an aspiration of mine even when I was in the House of Representatives."
With ambitious Chicago Democrats quickly beginning to angle to replace Mayor Daley, pressure is building for Emanuel to make a decision.
This morning on the Today Show, President Obama was asked if he would endorse his chief of staff in a mayoral campaign.
"I have said I think he would be an excellent mayor, but until he makes a decision, I'm not going to be making decisions about how I'm going to approach it," said Obama.
The president has been clear that Emanuel has his blessings, his aides calling it an unbelievably attractive opportunity.
President Obama thinks Emanuel will have to make a decision quickly because he says that running for mayor is a serious enterprise.
Sources close to Emanuel cautioned that he has yet to decide on whether he will run.
Sources say what is weighing heavily on his mind are family considerations and uprooting his wife Amy and their three children for the second time in as many years.
Emanuel has to declare his intent to enter the race by November 22nd, the filing deadline in Chicago.
Candidates need to collect 12,500 signatures to qualify for the February 22nd Democratic primary.
ABC News has also learned that if and when Emanuel makes the announcement, President Obama is expected to name an interim chief of staff - perhaps Senior Advisor Pete Rouse.