Blair, a retired Navy admiral, is the third director of national intelligence, a position created in response public outrage over the failure to prevent the Sept. 11, 2001, terrorist attacks.
In a message to his work force, Blair said his last day would be May 28.
Two government officials said several candidates have been interviewed for the national intelligence director's job, which is to oversee the nation's 16 intelligence agencies. Both officials spoke on condition of anonymity because the announcement had not yet been made.
His term in office was marked by turf battles with the CIA director and controversial public comments in the wake of the abortive Christmas Day jetliner bombing.
CIA Director Leon Panetta and Blair squared off in May over Blair's effort to choose a personal representative at U.S. embassies to be his eyes and ears abroad, instead of relying on CIA station chiefs, as had been past practice.
Word of Blair's resignation, first reported by ABC News, comes two days after a Senate report criticized his office and other intelligence agencies for new failings that allowed a would-be bomber to board a Detroit-bound airliner on Christmas Day. The Senate Intelligence Committee found that the National Counterterrorism Center was in a position to connect intelligence that could have prevented the potentially deadly attack. As director of national intelligence, Blair oversaw the center.
After the airliner bombing attempt, Blair said a new, elite federal interrogation unit of counterterrorism specialists should have been called in to question the suspected bomber, Nigerian Umar Farouk Abdulmutallab.
But that unit, known as the High-Value Interrogation Group, was not an option because it wasn't ready for action. The HIG team was deployed after the recent Times Square bombing attempt this month, administration officials said this week.
Blair also told Congress that Abdulmutallab continued to provide helpful information to investigators at a time when authorities had hoped to keep the bomber's cooperation secret. With that information divulged, FBI Director Robert Mueller confirmed at the same hearing that Abdulmutallab was cooperating.
Blair was the first Obama administration official to describe the deadly shooting rampage at Fort Hood, Texas, last fall as an act of homegrown extremism. The administration had previously been reluctant to call the suspect, an Army psychiatrist, a homegrown terrorist or extremist.
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Associated Press writer Matt Apuzzo contributed to this report.
