The New York Times reported that Microsoft is planning to announce the layoffs on Thursday and the jobs cuts will "substantially exceed the largest layoffs in the company’s history".
The last largest layoffs in Microsoft happened in 2009, when about 5,800 people were affected.
In his 3,100-word memo to employees last week, Nadella had said that Microsoft would announce organisational changes in July to help it simplify and move faster.
"We will increase the fluidity of information and ideas by taking actions to flatten the organisation and develop leaner business processes," he had said.
"Culture change means we will do things differently.
The majority of the layoffs are expected to happen in the businesses that Microsoft bought from mobile company Nokia several months ago, a deal that added about 25,000 people to Microsoft’s payroll.
The cuts however will not be confined to the Nokia groups, according to the people briefed on the company’s decision.
In his memo, Nadella had said he intended to pursue a much broader transformation of the company.
The NYT report said employees at the company’s campus in Washington are bracing for the news with human resources managers beginning to reserve conference rooms, most likely a sign that they will be used to meet with laid-off employees.
It said employees will also have a chance to question Nadella about the cuts on Friday at a regular town hall meeting that was scheduled before the exact timing of the layoffs was known.
"Large layoffs are a rarity at Microsoft. Its layoffs in 2009 came during the economic recession that followed the bursting of the housing bubble", the report said.
"Since then, Microsoft has had a few more rounds of staff reductions, but the number of employees let go were typically in the dozens or hundreds," the NYT report said.
Microsoft currently has 1,25,000 employees and NYT said laying off thousands more than the 5,800 people laid off in 2009 would represent a small portion of the company work force.
The report cited current and former employees as saying that Microsoft has grown too large and complex to compete effectively against other, more nimble companies.