The Clintons will finance $1.995 million of the purchase through Citibank, a White House spokeswoman said.
The Clintons already own a home in Westchester County, N.Y., and White House spokesman Jake Siewert said that home would remain their primary residence.
The Washington home sits on a one-third-acre lot at the end of a secluded, dead-end street near the vice president's official residence on the grounds of the Naval Observatory. Its bright red door was adorned with a Christmas wreath Thursday night, "no trespassing" signs dotted the small front lawn, and a police officer sat out front in a patrol car.
The home has 7½ baths, a fireplace, a pool and garage, according to a real estate listing.
The Brazilian, Danish and Italian embassies are nearby.
The Clintons recently have toured homes in several of Washington's upscale neighborhoods. They came close during the Christmas weekend to a deal on one property, but couldn't agree with the owner on a price.
"Hillary's got to have some place to live, but we haven't closed a deal yet," the president said at a news conference Thursday. "She needs an address, and I'd like to have some place to come see her."
Last year, the Clintons bought a five-bedroom home in Chappaqua, N.Y., for $1.7 million, allowing the first lady to set up residency in the state and launch what became a successful bid to succeed Sen. Daniel Patrick Moynihan.
The white Dutch Colonial has two fireplaces, a swimming pool and an exercise room. President Clinton is expected to commute from the home to office space in Manhattan once he leaves office next month.
The Clintons have lived in public housing for 20 of the past 22 years 12 years when Mr. Clinton was governor of Arkansas and the past eight as president.
Mr. Clinton will earn $157,000 as an ex-president. Mrs. Clinton will earn $145,000 a year as a senator. She will be sworn in Jan. 3. They owe millions of dollars in legal fees, mostly as a result of the Whitewater and Monica Lewinsky investigations.
Two weeks ago, the first lady agreed to accept an $8 million advance from Simon & Schuster for her memoir among the highest ever for a nonfiction book.