Officials in Maryland and Washington DC are expected to sue Donald Trump for accepting payments from foreign governments via his business empire.
The lawsuit cites the US constitution’s emoluments clause, which says no federal official should receive a gift or a fee from a foreign government.
The legal action alleges “unprecedented constitutional violations” by the US president, the Washington Post reports.
It would be the first such lawsuit filed by government entities.
A non-governmental organisation, Citizens for Responsibility and Ethics in Washington, lodged a similar legal action in January.
At that time, Mr Trump told a reporter in the Oval Office the case was “totally without merit”. He has not yet commented on the latest move.
Mr Trump is already contending with inquiries by congressional committees and a special prosecutor into his campaign’s alleged links to Russia, which American intelligence agencies accuse of meddling in last November’s US election in a bid to boost support for the property developer.
Since taking office in January, Mr Trump has turned day-to-day control of his real estate empire and other assets over to a trust managed by his adult sons.
But he has not sold them off as critics said he should do in order to avoid conflicts of interest.
The attorneys general of Maryland and District of Columbia respectively, Brian Frosh and Karl Racine, both Democrats, have scheduled a news conference for midday local time (1600 GMT) on Monday .
The Maryland attorney general told the Washington Post the case was about Mr Trump’s failure to divide his presidential duties from his personal interests.
According to the newspaper, the lawsuit says Mr Trump is “deeply enmeshed with a legion of foreign and domestic government actors” through his business empire.
“Never before has a President acted with such disregard for this constitutional prescription,” it will charge.
The lawsuit will reportedly ask for a court injunction blocking Mr Trump from accepting foreign money.