The singers are said to have agreed terms to join Simon Cowell and LA Reid at the judges' table and merely have to formally sign their contracts, a source has claimed to E! News.
Spears has been rumoured to take on a judging role for a number of weeks, and X Factor creator Simon Cowell has been open about his desire to add her to the panel.
Cowell said in an interview earlier this month that he thinks Spears would be a "fascinating" addition to the show.
Rumors linking Unbroken singer Lovato to the vacant judging roles, however, only gathered momentum earlier this week.
If confirmed, the pair would replace Nicole Scherzinger and Paula Abdul on the panel for The X Factor USA's second season, for which auditions are already underway.
The X Factor USA is due to return to Fox later this year.
Watch Britney Spears in the video to 'I Wanna Go' below: