The demotion, which will be worth at least ten places, is a hangover from the reliability woes Hamilton suffered at the start of the season.
The three-time world champion leads this year's title race by 19 points from team-mate Nico Rosberg, reports Sky Sports.
Hamilton has reached the penalty-free limit for two of the six power-unit elements that the current rulebook regard as comprising an F1 engine.
A 10-place grid penalty is applied whenever a sixth unit of any of those elements is first used by a driver. A five-place penalty is then imposed the first time a remaining sixth element is introduced.
Having previously indicated they would elect to trigger his long-anticipated demotion in either Belgium or at next week's Italian GP at overtaking-friendly Monza, Mercedes is expected to fit Hamilton's car with at least two new engines whenever the penalty is taken.
The Englishman would then suffer his penalty in a single hit rather than run the risk of enduring a series of demotions during the rest of the season.
"An engine penalty is likely and confirmation is expected tomorrow," a team spokesperson said on Wednesday.
Although Hamilton's penalty may be in excess of the 22 positions on this year's grid, any remaining demotions can't be carried over for subsequent races after the rules were amended at the start of the year.
Sunday's race will be the first since the sport broke up at the end of July for a summer break.
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