The flamboyant singer - who came second on the talent search contest in 2009 - is said to have been in talks for a month with show bosses, who see him as the perfect addition to the program because he has such a big fan base and would understand the challenges the contestants must deal with.
A source told E! Online: ''He personifies the show, and will be a popular choice right from the start.
''He knows what it's like to be on the receiving end of the judges' comments, he has a human touch, and they know they can't go wrong if they bring him on. He would be able to bring a unique perspective to the show. People love him.''
The panel currently features Jennifer Lopez - who is rumored to be leaving to focus on her music career - Steven Tyler, both of whom joined the show two years ago, and Randy Jackson, who has been a judge since it began.
Despite the question marks hanging over Jennifer's 'American Idol' future, the insider suggested Adam is not being seen as her replacement but would take over from Randy in a bid to freshen up the format.
The source added: ''Randy is great, but he's part of the old 'Idol' They want to keep the soul of the show but have a New Look, and for that reason he may well not be part of the new line up.''
While Steven's future is also said to be ''up in the air'', bosses want to do whatever it takes to keep their female judge.
Another source said: ''I don't know if they can afford Jennifer, but they have let it be known that she has a guaranteed spot if she wants it.
''She appeals to everyone so the big bosses are in favor of keeping her on.''
A spokesperson for 'Idol' declined to comment on the rumors.