The European Commission, the European Union's executive, is reviewing Kraft's takeover plan after the maker of Dairylea and Oreo cookies offered concessions last month to ease regulatory concerns that its bid for Cadbury could be anticompetitive.
A decision is due by Wednesday. The European Union competition watchdog is expected to clear Kraft's bid conditionally, the source said.
It will be a phase one clearance based on commitments offered by Kraft, the source told Reuters, but gave no details.
Under EU merger regulations, the Commission usually carries out a first-phase, 25 working days review of a takeover or acquisition. It can launch an in-depth investigation if it feels there are competition concerns with the deal.
Kraft said last month it had offered concessions in a few markets and did not expect the regulator to demand major divestments.
Kraft shares were up 0.9 percent to $27.41 and Cadbury shares were 1.1 percent higher at 806 pence by 1536 GMT.
Kraft is expected to sweeten its bid in the next two weeks in a final attempt to win over Cadbury.
For a graphic on Cadbury's share price and the value of the Kraft bid, click:
The combination of Kraft, which makes chocolate brands Toblerone, Cote D'Or, Terry's and Suchard, and Cadbury, which makes Dairy Milk chocolate, would create the world's biggest confectionery group, overtaking Mars-Wrigley.
Cadbury would help expand Kraft's business into faster growing markets such as India and the higher-margin and faster growing confectionery markets.
(Reporting by Foo Yun Chee, editing by Will Waterman)