The Government are set to announce that the Olympic Stadium deal with West Ham and Newham Council has collapsed, sources said.
Legal challenges by Tottenham and Leyton Orient, plus an anonymous complaint to the European Commission, has led to fears that court action could drag on for years while the stadium remains empty.
A ministerial statement is expected around lunchtime, saying that the stadium will remain in public ownership and leased out to an anchor tenant following a new tender process.
It is likely that under the new tender process any costs of transforming the stadium after the 2012 Games will be covered by the Olympic Park Legacy Company. Prospective tenants will then be asked to bid for the stadium with the running track remaining in place.
The tenants would pay an annual rent to the OPLC which could actually prove to be less costly for the likes of West Ham.
The move will also remove uncertainty over the stadium ahead of London's bid for the 2017 world athletics championships, although that was not a major consideration in the decision to abandon the current deal.
The Government, the London Mayor's office and the OPLC have moved to scrap the current deal in order to try to end the legal challenges over the stadium's ownership.
There has been an anonymous complaint to the European Commission, claiming that the £40million being provided by Newham to West Ham represented "state aid". That complaint was regarded with particular concern with worries that it could take years to come to a conclusion.
There were also fears that the application for a judicial review by Spurs and Orient could drag on and even if their bids failed they could appeal.
It is understood that no contract has been signed with West Ham, allowing the move to a fresh tender process, but the club will be encouraged to bid again.
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