The pact named the General Security of Military Information Agreement (GSOMIA) calls for the two countries to exchange intelligence about North Korea and its nuclear and missile programmes, Yonhap news agency said.
It cited a government source for its information. A foreign ministry spokesman declined to comment.
Citing lingering anti-Japan hostility, South Korea last month suspended the signing of the agreement and of another military accord on sharing logistics excluding weapons and cooperating in peacekeeping operations abroad.
Seoul has decided to go ahead with the intelligence agreement while shelving the more sensitive logistics accord, which could allow Japan's troops to enter the South's territory in times of crisis, the report said.
"The two governments will officially sign the deal as early as this week, or sometime next week at the latest," the source told Yonhap, adding that Seoul's cabinet approved the move Tuesday.
The South had postponed discussion on the intelligence-sharing deal given its territorial dispute with Japan, the source said. The two countries are in contention over ownership of rocky islets in the Sea of Japan (East Sea).
But North Korea's long-range missile launch in April highlighted the need to swap information, Yonhap quoted an unidentified Seoul official as saying.
Many older people in South Korea still have bitter memories of Japan's 1910-45 colonial rule.
Tokyo has rejected Seoul's proposal for talks on compensation for Korean women used by Japan as military sex slaves during World War II.