WASHINGTON – President Bush has settled on Michael B. Mukasey, a retired federal judge from New York, to replace Alberto Gonzales as attorney general and will announce his selection tomorrowy, a source familiar with the president’s decision said this evening.

Judge Mukasey, who has handled terrorist cases in the American legal system for more than a decade, would become the nation’s top law enforcement officer.

The 66-year-old New York native, who is a legal adviser to GOP presidential hopeful Mayor Giuliani, would take charge of a Justice Department where morale is low following months of investigations into the firings of nine Federal prosecutors attorneys and Mr. Gonzales’ sworn testimony on the Bush administration’s terrorist surveillance program.

Bush supporters say Judge Mukasey, who was chief judge of the high-profile courthouse in Manhattan for six years, has impeccable credentials, is a strong, law-and-order jurist, especially on national security issues, and will restore confidence in the Justice Department.

Bush critics see the Judge Mukasey nomination as evidence of Mr. Bush’s weakened political clout as he heads into the final 15 months of his presidency. It’s unclear how Senate Democrats will view Judge Mukasey’s credentials, but early indications are that he will face less opposition than a more hardline, partisan candidate like Ted Olson.

Judge Mukasey has received past endorsements from Senator Schumer, Democrat of New York, who is from Judge Mukasey’s home state. And in 2005, the liberal Alliance for Justice put Judge Mukasey on a list of four judges who, if chosen for the Supreme Court, would show the president’s commitment to nominating people who could be supported by both Democrats and Republicans.

Last week, some Senate Democrats threatened to block the confirmation of Mr. Olson, who represented Mr. Bush before the Supreme Court in the contested 2000 election. Democratic senators have theorized that Mr. Bush might nominate Judge Mukasey, in part, because he wanted to avoid a bruising confirmation battle.

The possibility that Mr. Bush would nominate Judge Mukasey, however, inflamed some supporters on the GOP’s right flank, who have given Judge Mukasey less-than-enthusiastic reviews. Some legal conservatives and Republican activists have expressed reservations about Mukasey’s legal record and past endorsements from liberals, and are already drafting a strategy to oppose his confirmation.

Judge Mukasey was nominated to the federal bench in 1987 by President Reagan. He was chief judge of the Federal District Court for the Southern District of New York before he rejoined the New York law firm of Patterson Belknap Webb & Tyler as a partner in September 2006.

He first joined Patterson Belknap in 1976 after serving as a federal prosecutor in the criminal division of the Southern District, where he rose to become chief of its official corruption unit. During his 18 years as a judge, Judge Mukasey presided over thousands of cases, including the trial of Sheik Omar Abdel-Rahman, who was accused of plotting to destroy New York City landmarks.

In the 1996 sentencing of co-conspirators in the case, Mukasey accused the sheik of trying to spread death “in a scale unseen in this country since the Civil War.” He then sentenced the blind sheik to life.

The Judge Mukasey nomination could be Mr. Bush’s last major Cabinet appointment.

Friday was the last day of Mr. Gonzales’ 2-1/2 years at Justice. Solicitor General Paul Clement will serve as acting attorney general until the Senate confirms Mr. Gonzales’ replacement.

Mr. Gonzales’ conflicting public statements about the firings of the federal prosecutors led Democrats and Republicans alike to question his honesty.

Their charges were compounded by his later sworn testimony about the terrorist surveillance program, which was contradicted by FBI Director Robert S. Mueller and former senior Justice Department officials.

A congressional investigation into the firings recently shifted its focus onto whether the attorney general lied to Congress. The Justice Department also has opened an internal investigation into the matters.

At first, the president backed his embattled attorney general. At an August 9 news conference, Mr. Bush said, “Why would I hold somebody accountable who has done nothing wrong?”

A little more than two weeks later, Bush announced that he had “reluctantly” accepted the resignation of Mr. Gonzales, who followed John Ashcroft’s four-year stint as Mr. Bush’s first attorney general. Mr. Bush said Mr. Gonzales, his loyal colleague from Texas who was his White House counsel before heading to Justice, had worked tirelessly to keep the nation safe.

Mr. Bush said opposition lawmakers treated Mr. Gonzales unfairly for political reasons. “It’s sad that we live in a time when a talented and honorable person like Alberto Gonzales is impeded from doing important work because his good name was dragged through the mud,” Mr. Bush said.