In a move designed to stress a commitment to the Catholic Church, the Coalition has decided that the former Conservative MP would represent a suitably high-profile appointment. William Hague, the Foreign Secretary, is understood to have endorsed the nomination, which will be sent to the Vatican for final approval before an announcement is made later in the summer.
He is a long-standing supporter of Miss Widdecombe, having made her shadow home secretary when he was Tory leader.
She would be the first Roman Catholic woman to be appointed to the post and would succeed Francis Campbell, the current ambassador, who will step down in the autumn after the Pope's visit to Britain.
"There is nothing imminent to be announced," she told The Sunday Telegraph.
The post, which comes with an official residence in Rome, was created after the Reformation, yet was not given ambassadorial status until 1982.
It had never been held by a Catholic until Mr Campbell was appointed by Tony Blair in 2006.
At the time there were questions over whether a Catholic would be able to be objective in serving the Government in negotiating with the Holy See, but the diplomat is widely admired for the job he has done.
A Foreign Office memo written in 1917 is said to have advised Britain's papal envoy to not be "in awe of the Pope".
While there is likely to be surprise at the choice of such an outspoken figure for such a sensitive diplomatic role, Miss Widdecombe is a devout Catholic and is well-respected within the Church for her staunch defence of its orthodox teaching.
In an interview with Radio 4's Analysis programme, to be broadcast tomorrow, she expresses concern at growing intolerance to Christianity in Britain.
"I believe there's a malaise in society in general that doesn't understand and doesn't want to understand Christianity," she says.
"I think everywhere you look, we are now blurring the distinction between maintaining equality – which I agree with entirely – and respecting Christian conscience."
Referring to the introduction of new equality laws under the last government, which led to the closure of Catholic adoption agencies, she says: "In a truly free society nobody should be forced by law to promote something to which they have a serious conscientious objection."
Relations between the Church and Labour had become increasingly strained, but the new Government has taken steps to reassure Catholic leaders that it is keen to strengthen ties.
David Cameron appointed Lord Patten of Barnes, one of the country's leading lay Roman Catholics, to oversee preparations for the visit of Pope Benedict XVI in September after a series of setbacks and embarrassments, including a Foreign Office memo mocking the Pope.
The decision to make Miss Widdecombe ambassador signals another move to reassure Britain's five-million-strong Catholic community.
Fluent in Latin, the language spoken in the Vatican, she converted to Catholicism in 1993 after the Church of England voted to ordain women priests.
She is a close friend of Cardinal Cormac Murphy-O'Connor, the Archbishop of Westminster and head of the Catholic Church in England and Wales until his retirement last year, and was consulted over the appointment of his successor.