Mr McGrath will earn more than €300,000-a-year in the position and will benefit from a range of lucrative allowances and expenses available to European Commissioners.
Tánaiste Micheál Martin put forward his constituency colleague’s name at a meeting of the Government Leaders.
The nomination will be formally ratified by the Cabinet when they meet Government Buildings tomorrow morning.
The Fianna Fáil leader’s decision to nominate his most senior Cabinet minister is aimed at securing a coveted financial portfolio on the European Commission.
However, the move means the Cabinet will have to be reshuffled again just over two months after there was a changing of ministries following the appointment of Simon Harris as Taoiseach.
It also means the Government is facing the prospect of five by-elections early next year.
Newly-appointed Fianna Fáil deputy leader Jack Chambers is being tipped to take over the role of Finance Minister after his surprise elevation to second in command to the Tánaiste last week.
Housing Minister Darragh O’Brien was also suggested as a possible replacement for Mr McGrath, as was Minister of State in the Department of Enterprise Dara Calleary. However, sources close to Mr O’Brien played down suggestions he could change portfolio so close to the end of the Government’s term and given the importance of his department.
If Mr Chambers is appointed, it is believed Mr Calleary will be promoted to Cabinet where he will take the role vacated by the Fianna Fáil deputy leader.
In this scenario, Cavan-Monaghan TD Niamh Smyth could also be in line for promotion into Mr Calleary’s former position.
Michael McGrath has played down speculation for months that he is in line for a one of the most lucrative jobs in politics.
He will be the first Fianna Fáil politician to be appointed to the Commission since Máire Geoghegan-Quinn stepped down ten years ago.
Ms Geoghegan-Quinn was replaced by Fine Gael’s Phil Hogan, who was in the middle of his second term when he was forced to resign by the Coalition due to breaches of Covid-19 regulations. Mr Hogan was replaced by Fine Gael MEP Mairead McGuinness.
It was agreed during Programme for Government negotiations that Fianna Fáil would be entitled to decide who Ireland’s commissioner would be after the recent European elections.
Mr McGrath was appointed Minister for Public Expenditure and Reform when the Fianna Fáil, Fine Gael and Green Party Coalition was formed.
It was agreed by the Coalition partners that Mr McGrath would swap roles with Finance Minister Paschal Donohoe when the role of the Taoiseach was rotated in December 2022.
There was some concern within Fine Gael that Mr Donohoe would have to resign his position as President of the Eurogroup if he was no longer Ireland’s Finance Minister.
However, a deal was reached in Brussels which allowed him remain President while also allowing Mr McGrath attend meetings as Finance Minister.
Mr McGrath will be paid €25,900 a month once he takes up the role as a commissioner. The father of seven will also be entitled to a family allowance along with a payment to cover cost of paying for accommodation in Brussels.
Commissioners also get an entertainment allowance and have all flights and accommodation covered by European taxpayers.
The new finance minister will be responsible for delivering the Coalition’s final budget before the next general election.
Last week, Taoiseach Simon Harris urged Fine Gael parliamentary party members to fight back against suggestions there would be a general election before the Budget was announced.
The Fine Gael leader also asked members to put forward suggestions for budget measures.
The first job of the new Finance Minister will be the publication of the Summer Economic Statement which will set out how much funding the Government have to spend on welfare increases and tax cuts.