The 22-year-old has been unable to earn a regular first-team place at Stamford Bridge, and the arrival of Nemanja Matic from Benfica means he will be sacrificed by manager Jose Mourinho.
De Bruyne had a successful loan spell with Wolfsburg's Bundesliga rivals Werder Bremen last season, and is now poised to make a permanent switch to Germany.
German reports suggest Wolfsburg will pay around 20million euros (£16.7million) for De Bruyne.
Wolfsburg are on a mid-season trip in China, but sporting director Klaus Allofs told German broadcaster NDR: "Kevin is in Wolfsburg. We hope that everything so far is going to plan."