Napolitano recently reached her decision after the program was discussed with law enforcement officials, and she was told it was not an urgent issue, said the official, who spoke on condition of anonymity because he was not authorized to talk about it.
The program was announced in 2007 and was to have the Homeland Security Department use overhead and mapping imagery from existing satellites for homeland security and law enforcement purposes.
The program, called the National Applications Office, has been delayed because of privacy and civil liberty concerns.
The program was included in the Obama administration's 2010 budget request, according to Rep. Jane Harman, a California Democrat and House Homeland Security Committee member who was briefed on the department's classified intelligence budget.
Harman said Monday she had not been given final word that the program would be killed. She said she would talk to Napolitano on Tuesday.
Harman has been outspoken about her concerns that the program is unnecessary, far reaching and open-ended.
"I thought this was just an invitation to huge mischief," Harman said. Of killing the program, she said, "It shows real leadership on the part of Janet Napolitano."
Homeland Security spokeswoman Amy Kudwa said Napolitano began looking at the program shortly after she became secretary. Kudwa said the department expects to announce the results of that review soon.
Rep. Peter King, R-N.Y., said he hoped the department wasn't canceling the program.
"If it is true, it's a very big mistake," said King, who is the top Republican on the House Homeland Security Committee. "This is definitely a step back in the war on terror."
For years, domestic agencies such as the Federal Emergency Management Agency and Interior Department have had access to this satellite imagery for scientific research, to assist in response to natural disasters like hurricanes and fires, and to map out vulnerabilities during a major public event like the Super Bowl.
Since 1974 the agency's requests satellite imagery have been made through the federal interagency group, the Civil Applications Committee.
The Bush administration, however, decided to funnel the requests through the Homeland Security Department and expand their use for homeland security and law enforcement purposes.
After receiving a letter from Los Angeles Police Chief William Bratton, Napolitano decided the program should be canceled.
Bratton, in his role as head of the Major City Chiefs Association, wrote on June 21 that the program, as envisioned by the Bush administration, is not an urgent need for local law enforcement.
Instead, Bratton said, Homeland Security should focus on the fusion centers across the country and improving information-sharing with state and local officials to improve the domestic intelligence picture.
Bratton said he was unaware whether police chiefs have been consulted by Bush administration officials about the satellite program.
"To my knowledge, this is the first opportunity major law enforcement organizations have had to participate in this significant and complex initiative," he said in the letter.