Aides also said the diagnosis would not affect Dodd's plans to seek a sixth term in 2010.
Dodd planned to announce the diagnosis at a news conference in Hartford, Conn., Friday afternoon.
Dodd, 65, is chairman of the Senate Banking Committee and also is playing a lead role in Congress' overhaul of the nation's health care system. He took that role while his close friend, Senate health committee Chairman Edward Kennedy, D-Mass., fights his own battle with brain cancer.
Prostate cancer is the most common form of the disease in men in the United States, affecting about 6.4 out of every 100 men in Dodd's age group, according to the Centers for Disease Control.
The e-mail said that a routine test caught Dodd's cancer at an early stage and he is expected to make a full recovery.
Dodd is married to the former Jackie Clegg. They have two young daughters.
Dodd is facing what's expected to be a tough re-election campaign.
The Senate ethics committee is probing whether Dodd violated standards of conduct when he received mortgage discounts from the VIP program at Countrywide Financial Corp.
Dodd, whose committee oversees the banking and financial industries, insists he did not receive special deals. He produced a report showing other lenders would have offered the same rates. Dodd also said he thought the VIP program simply meant enhanced customer service and the ability to get a live person on the phone.
The senator ran unsuccessfully for the 2008 Democratic presidential nomination.
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