The London Organising Committee is set to announce the tier-two sponsorship deal with the confectionery giant within the next few days.
Cadbury will be able to use the Olympics as part of its marketing from January 2009 in return for a £20m donation.
The deal looks set to come in for criticism from some health campaigners especially in light of Lord Sebastian Coe's promise that the 2012 Games would be built around getting young people fitter and more active.
Cadbury has caused controversy with its sports sponsorship in the past when it ran a "Get Active!" promotion that encouraged children to eat chocolate in exchange for sports equipment for their school.
A spokesman for Cadbury told The Telegraph: "We would not do anything that would seek to encourage people to eat more chocolate."
London 2012 signed up seven tier-one domestic partners ahead of the Beijing Games -- Adidas, British Airways, BP, BT, EDF Energy, Lloyds TSB and Nortel.
The Games will also be supported by global partners including McDonald's, Coca-Cola and Samsung.
Cadbury's sponsorship deal comes amid news that it plans to cut up to 600 jobs as part of a cost-reduction programme.
It is getting rid of its four region structure in a move that will mean the departure of Matt Shattock, head of Cadbury in Britain and Ireland, the Middle East and Africa, and Rajiv Wahi, head of Cadbury, Asia Pacific.
It also said that the relaunch of its Wispa bar helped to deliver an 11% hike in quarterly revenues. It sold 50m Wispa bars alone in the last month.
Sales of a new range of Dairy Milk bars, following the gorilla ad campaign, also helped to deliver a strong three months to September 30.