The radio DJ, who is affectionately known as Grimmy in the show business industry, is believed to "attract new viewers" and pull up ratings.
"Grimmy is one of the most well-connected men in showbiz and will make a brilliant judge," a source told The Mirror. "It's clear Simon Cowell's hope is that he will attract new viewers and artists to the show. He feels fresher and more relevant than some of the previous judges."
Nick Grimshaw has previously said he would like to join The X Factor panel
The insider went on to say that Nick – who is friends with Cara Delevingne, Harry Styles and Kate Moss among other stars – would replace veteran judge Louis Walsh. The Irishman has starred on the show since the beginning, for the past eleven seasons.
"Louis has been a great servant to the show but he is out of touch now compared to up and coming stars like Grimmy," the source added. "The hope is Grimmy can come in and Louis will leave."
However, complications would no doubt arise, given that Nick has a contract with BBC Radio 1, and would also be working for ITV if he joined The X Factor.
"The BBC will have mixed emotions," the source said. "On one hand, he will be on ITV, on the other, it will raise the profile even more of his breakfast show on Radio 1. Everyone seems confident something can be worked out."
Reports previously claimed that Louis Walsh had been axed by Simon Cowell
Reports surfaced last week claiming that Louis, 62, has been axed from the show by head honcho Simon Cowell. Simon, however, took to Twitter to set the record straight, writing: "Louis Walsh is one of the good guys. We will always be friends. The door remains open and who knows what's next......."
According to the Irish Daily Mail, Louis was surprised to wake up to reports on Sunday that he had been sacked. It has now been claimed that the pair had lengthy talks and that Simon did not in fact fire his friend.
"There is a short list of about four people to take the remaining two judging slots and Louis is part of that list," a source said. "Simon told him that he was in the mix but that his job was not guaranteed."