Secretary of State Hillary Rodham Clinton will notify Congress of her intent Friday. A court had given her until Oct. 1 to make a decision.
The officials spoke on condition of anonymity because they weren’t authorized to speak about the matter.
The decision looks set to end years of high-profile campaigning from the Mujahadin-e-Khalq — and infuriate Iran.
The MEK helped Islamic clerics overthrow Iran’s shah before fighting against the Iranian regime. It fought in the 1980s alongside Hussein’s forces in the Iran-Iraq war. It disarmed after the U.S. invasion of Iraq in 2003.