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The president will give Congress six months to draw up legislation to replace the Deferred Action for Childhood Arrivals (DACA), sources quoted by media say.
According to a Politico report, the decision is considered a compromise amid strong support for the scheme.
However, the sources cautioned that President Trump could still change his mind.
President Trump is due to formally announce his decision on September 5.
The Obama-era DACA program protects hundreds of thousands of so-called “Dreamers” from deportation and provides work and study permits.
According to Politico, the White House informed House Speaker Paul Ryan of President Trump’s decision on September 3.
Paul Ryan last week urged the president not to scrap the scheme, arguing it left many young people “in limbo”.
“These are kids who know no other country, who were brought here by their parents and don’t know another home,” he said.
Paul Ryan is one of a growing number of Republican lawmakers and business leaders to speak out against scrapping the program.
While campaigning for office, Donald Trump took a hard-line on immigration and said he planned to “immediately terminate” the DACA program.
However, since then Donald Trump has said he finds the subject “very, very tough”.
The president said he intends to show “great heart” in dealing with what he described as, in many cases, “incredible kids”.
The decision to give Congress six months to draft an alternative is seen as a compromise after Republican lawmakers and business leaders from companies including Google, General Motors and Microsoft urged President Trump to retain the program.
On September 3, former Democratic presidential candidate Hillary Clinton tweeted: “Thanks to Dreamers’ courage & resolve, #DACA has allowed thousands of young people to contribute to our society. We’re better for it.”
Ileana Ros-Lehtinen, a Cuban-American Republican Representative from Florida, also took to Twitter to vent her frustration, saying: “After teasing #Dreamers for months with talk of his <<great heart>>, @POTUS slams door on them. Some <<heart>>.”
The DACA program protects roughly 750,000 people in the US from deportation and provides temporary permits for work and study.
In order to qualify for DACA, applicants under the age of 30 submit personal information to the Department of Homeland Security.
They must go through an FBI background check and have a clean criminal background, and either be in school, recently graduated or have been honorably discharged from the military.
In exchange, the US government agrees to “defer” any action on their immigration status for a period of two years.
The majority of so-called Dreamer immigrants in the US are from Mexico and other Latin American countries.
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