The official, speaking on condition of anonymity, said the decision was based on an increase in intelligence pointing to a possible attack around the Muslim holy period of Hajj.
President Bush approved the decision in a meeting early Friday. The administration planned to announce the change later in the day.
Senior White House, Justice and Homeland Security Department officials had considered raising the level for several days.
The alert has been at code yellow, or "elevated," which is the middle of a five-point scale of risk developed after the Sept. 11, 2001 attacks. It was last raised to orange in September. It stayed at orange then for two weeks to coincide with the first anniversary of the attacks.
The alert has been at code yellow, or "elevated," which is the middle of a five-point scale of risk developed after the Sept. 11, 2001 attacks. It was last raised to orange in September and stayed there for two weeks to coincide with the first anniversary of the attacks. The highest alert level is red.
Government officials have grown increasingly concerned about the likelihood of terrorist attacks within the United States as intelligence sources are reporting an increase in terrorist activity or "chatter." One official, speaking on condition of anonymity, said this activity appeared to be peaking and was rivaling that seen before the Sept. 11, 2001 terror attacks.
Officials are increasingly worried that al-Qaida and other terrorist groups might try to use chemical, biological or radiological weapons such as a "dirty bomb" that spews radiation into the atmosphere over a relatively confined area. There is no evidence, they say, that al-Qaida has acquired nuclear weapons but there is ample proof that it was working with a variety of harmful substances.
There is also concern that individual al-Qaida member or sympathizers could attempt small-scale attacks, such as a shooting or suicide bombing.
Although al-Qaida has been largely driven from its former refuge in Afghanistan, the FBI cites the October nightclub bombing in Bali, Indonesia, that killed nearly 200 and November attacks on a resort and airliner in Kenya as evidence the network can still inflict great damage.
The reasoning behind Bush's decision was unclear early Friday. One U.S. official said there was no specific threat made, but the increase in chilling U.S. intelligence - much of it corroborated - led the administration to determine that there was sufficient reason to put Americans on notice.
U.S. preparation for a possible war with Iraq and Sunday's start of the Hajj were also key factors in the decision to raise the alert status. Muslim holy periods tend to raise jitters about terrorist activity among U.S. intelligence officials.
As in the past, officials said they had no information regarding specific terrorist threats and no indication of a time, place or manner of any attack. The FBI, however, is preparing to tell Congress that al-Qaida remains the greatest threat for carrying out a terror attack on U.S. soil.
The alert level was raised last September, when a high-level al-Qaida prisoner warned that an attack was imminent on U.S. embassies in southeast Asia.
Those attacks did not take place and may have been broken up by arrests. U.S. officials say they have thwarted more than 100 terrorist plots around the world, including some planned within the United States, since the Sept. 11 attacks.