The Appointments Committee of the Cabinet, headed by Prime Minister Manmohan Singh, approved the recommendation of the Defence Ministry, a day after it was received, sources said.
Formal announcement about the appointment is likely to be made in a couple of days, the sources said.
59-year-old Lt Gen Suhag, a Gurkha officer who had participated in the 1987 Indian Peace Keeping Force (IPKF) operation in Sri Lanka, is currently the Vice Chief of Army Staff and the seniormost among the Lt Generals.
Suhag was made the Vice Chief of Army Staff in December last year. Earlier, he took over as the Eastern Army Commander on June 16, 2012.
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He was at the centre of a controversy triggered by 'Discipline and Vigilance' ban imposed on him by the then Army Chief Gen V K Singh in connection with an intelligence operation in Assam earlier.
The ban on Suhag, who was then 2 Corps Commander, was lifted soon after Gen Bikram Singh took over in May 2012.