Assistant army chief Thirachai Nakwanich will succeed Udomdej Sitabutr as the next army commander, a source at the Defence Ministry says.
His closest rival Gen Preecha Chan-o-cha, the younger brother of Prime Minister Prayut Chan-o-cha, will be appointed as the Defence Ministry's permanent secretary, the source added.
But the prime minister also told reporters his brother was fully qualified to be the next army chief, keeping alive the guessing game over the annual reshuffle.
The speculation came as lists of names for military promotions were reportedly sent to an army personnel committee led by Deputy Prime Minister and Defence Minister Prawit Wongsuwon for consideration.
Gen Udomdej, who will retire on Sept 30, nominated Gen Thirachai, his colleague in Class 14 of the Armed Forces Academies Preparatory School, after talking to Gen Prawit about his potential successors on two occasions, the source said.
Gen Prawit declined to comment Wednesday on who the new army chief would be. Neither did he say whether he had received nomination lists from all the armed forces.
In his latest comments, Gen Prawit only said he "cannot make changes to name lists" forwarded to his committee by superiors of the promoted officers.
"They [the armed forces] must have been confident in their decisions before sending the lists to the Defence Ministry," Gen Prawit said.
However, according to the source, Gen Prawit backs Gen Thirachai to take the top army job because Gen Thirachai was once posted to the 2nd Infantry Division in Prachin Buri, and is a member, like him, of the Burapha Phayak, or Tigers of the East military clique.
Gen Prawit is dubbed by media crews as the "big brother" of the Burapha Phayak.
Commenting on views of some officers' so-called nong rak, or favourite younger brothers, Gen Prawit said this is solely the media's perception because in fact "everyone is his nong rak".
The final decision on who will be the new army chief will be made by his committee and even the prime minister will not interfere in the matter, Gen Prawit insisted.
However, the source said, Gen Prayut also does not want to see his younger brother, Gen Preecha, become a political target by taking the army top job as critics would call the promotion nepotism.
Gen Prayut is not worried about a possible counter-coup, the source added, as military brass are loyal to him, Gen Prawit and Interior Minister Anupong Paojinda.
AFP news agency reported an exchange between Gen Gen Prayut and the media where the premier said he may appoint his brother as next army chief.
He defended the decision to consider his sibling Gen Preecha, currently serving as an assistant army chief, for the top job.
"Why is it a problem that he is my younger brother?" Gen Prayut asked reporters on Tuesday when asked about the possibility of his sibling winning the role.
"Why would his appointment be damaging?"
"He's never asked me for any favours. He's worked his way up himself," added the premier, dismissing speculation of a counter-coup against Gen Preecha's appointment.
"I don't fear a counter-coup. I am happy to hand over power," he said.